[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]





                     ACCESSION OF CHINA TO THE WTO

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 3, 2000

                               __________

                             Serial 106-105

                               __________

         Printed for the use of the Committee on Ways and Means

                   U.S. GOVERNMENT PRINTING OFFICE
67-832                     WASHINGTON : 2001

_______________________________________________________________________
            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 
                                 20402


                      COMMITTEE ON WAYS AND MEANS

                      BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
BILL THOMAS, California              FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida           ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut        WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana               JIM McDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania      KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma                LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida

                     A.L. Singleton, Chief of Staff

                  Janice Mays, Minority Chief Counsel


Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.


                            C O N T E N T S

                               __________

                                                                   Page

Advisory of April 18, 2000, announcing the hearing...............     2

                               WITNESSES

U.S. Department of the Treasury, Hon. Lawrence H. Summers, 
  Secretary......................................................    23
U.S. Department of Agriculture, Hon. Dan Glickman, Secretary.....    29
U.S. Department of Commerce, Hon. William M. Daley, Secretary....    33
Office of the United States Trade Representative, Hon. Charlene 
  Barshefsky, United States Trade Representative.................    39

                                 ______

China Outreach Ministries, Inc., Reverend Daniel Baida Su........    96
Columbia 300, Inc., Kyle J. Burns................................   121
Dui Hua Foundation, John Kamm....................................    99
Citigroup, Inc., and Ford Motor Corporation, New York, New York, 
  Hon. Robert E. Rubin...........................................    63
United Automobile, Aerospace, and Agricultural Implement Workers 
  of America, Alan Reuther.......................................   111
U.S.-Taiwan Business Forum, David N. Laux........................   125
United States Commission on International Religious Freedom, Hon. 
  Elliott Abrams.................................................    88
Wolf, Hon. Frank R., a Representative in Congress from the State 
  of Virginia....................................................    10

                       SUBMISSIONS FOR THE RECORD

California-Asia Business Council, Oakland, CA, statement.........   140
Direct Selling Association, statement............................   141
Pacific Basin Economic Council, Gary Benanav, statement..........   142
Transglobalnetwork.com, Mountain View, CA, R. Theodor Kusiolek, 
  statement......................................................   143
United States-China Business Council, Robert A. Kapp, statement..   145
Wei Jingsheng Foundation, New York, NY, Wei Jingsheng, statement.   152

 
                     ACCESSION OF CHINA TO THE WTO

                              ----------                              


                         THURSDAY, MAY 3, 2000

                          House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10 a.m., in room 
1100, Longworth House Office Building, Hon. Bill Archer 
(Chairman of the Committee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS
                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
April 18, 2000
No. FC-21

                 Archer Announces Hearing on Accession

                          of China to the WTO

    Congressman Bill Archer (R-TX), Chairman of the Committee on Ways 
and Means, today announced that the Committee will hold a second 
hearing on the bilateral trade agreement between the United States and 
China and on the pending accession of China to the World Trade 
Organization (WTO). The hearing will take place on Wednesday, May 3, 
2000, in the main Committee hearing room, 1100 Longworth House Office 
Building, beginning at 10:00 a.m.
      
    Oral testimony at this hearing will be from both invited and public 
witnesses. Invited witnesses will include the Honorable Robert E. 
Rubin, Former Secretary of the Treasury, and the Honorable William M. 
Daley, Secretary of Commerce. Also, any individual or organization not 
scheduled for an oral appearance may submit a written statement for 
consideration by the Committee or for inclusion in the printed record 
of the hearing.
      

BACKGROUND:

      
    China applied for accession to the General Agreement on Tariffs and 
Trade (GATT) in July 1986, and work has proceeded in the China Working 
Party since that time to negotiate the conditions upon which China will 
enter the WTO.
      
    Article XII of the Agreement Establishing the World Trade 
Organization states that any State or separate customs territory may 
accede to the WTO ``on terms to be agreed between it and the WTO.'' In 
practice, any WTO applicant must negotiate terms for membership in the 
WTO in the form of a Protocol of Accession. Through the operation of a 
Working Party, the United States and other WTO members have an 
opportunity to review the trade regimes of applicants to ensure that 
they are capable of implementing WTO obligations. In parallel with the 
Working Party's efforts, the United States and other interested member 
governments conduct separate negotiations with the applicant. These 
bilateral negotiations are aimed at achieving specific concessions and 
commitments on tariff levels, agricultural market access, and trade in 
services.
      
    On November 15, 1999, Ambassador Barshefsky announced the 
successful completion of bilateral talks on China's accession to the 
World Trade Organization. The expansive market access agreement will 
provide broad market openings for U.S. agriculture, manufactured 
products and services, along with Chinese commitments to adopt WTO 
rules relating to such issues as technology transfer and offsets, 
subsidies, product safeguards, and State enterprises. In a separate 
agreement signed in April 1999, China agreed to end sanitary and 
phytosanitary bans on the importation of U.S. wheat, meat, and citrus 
products.
      
    The Agreement represents a crucial step in China's WTO accession 
process. Other steps that remain ahead include the conclusion of 
bilateral negotiations with a number of other WTO members, as well as 
the multilateral negotiations on China's accession protocol. China then 
must complete its domestic process for implementing the country's WTO 
commitments.
      
    Congressional approval of permanent normal trade relations (NTR) is 
not necessary for China to accede to the WTO. However, in order for 
American businesses, farmers, and workers to be guaranteed an 
opportunity to benefit from the trade concessions and better compete in 
China's markets, China's name must be removed from Title IV of the 
Trade Act of 1974, the so-called Jackson-Vanik amendment, which 
provides for an annual review of China's trade status based on freedom 
of emigration.
      
    Otherwise, the United States would be in violation of Article I of 
the GATT, which requires the extension of ``unconditional'' most 
favored nation (or NTR) status, and subject to trade sanctions. If the 
United States does not remove the conditions imposed by Jackson-Vanik, 
the United States would have to invoke the non-application clause of 
the GATT, meaning that China would be able to withhold benefits of the 
1999 bilateral agreement from the United States.
      
    In response to progress achieved in China's WTO commitments 
represented by the bilateral agreement with the United States, 
President Clinton announced that he will work with other WTO member 
countries to gain China's entry in the WTO as soon as possible. On 
March 8, 2000 he transmitted to Congress a request for legislation to 
terminate the application of Title IV of the Trade Act of 1974 to China 
and to extend permanent Normal Trade Relations treatment to products 
from China.
      
    The first hearing on this topic took place on February 16, 2000, 
and was announced in a Full Committee press release No. FC-16, dated 
January 31, 2000.
      

FOCUS OF THE HEARING:

      
    The focus of the hearing will be to examine: (1) the opportunities 
and issues associated with the entry of China into the WTO; (2) the 
potential benefits of the U.S.--China bilateral trade agreement for 
U.S. firms, workers, farmers, ranchers, and other interested parties; 
and (3) the current status of negotiations in Geneva for China to 
accede to the WTO. The Committee would also welcome testimony on how 
normalizing trade relations with China would affect other United States 
objectives in China and the surrounding region, such as improved 
respect for human rights, progress toward democratization, and enhanced 
economic and regional security.
      

DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:

      
    Requests to be heard at the hearing must be made by telephone to 
Traci Altman or Pete Davila at (202) 225-1721 no later than the close 
of business, Wednesday, April 26, 2000. The telephone request should be 
followed by a formal written request to A.L. Singleton, Chief of Staff, 
Committee on Ways and Means, U.S. House of Representatives, 1102 
Longworth House Office Building, Washington, D.C. 20515. The staff of 
the Committee will notify by telephone those scheduled to appear as 
soon as possible after the filing deadline. Any questions concerning a 
scheduled appearance should be directed to the Committee on staff at 
(202) 225-1721.
      
    In view of the limited time available to hear witnesses, the 
Committee may not be able to accommodate all requests to be heard. 
Those persons and organizations not scheduled for an oral appearance 
are encouraged to submit written statements for the record of the 
hearing. All persons requesting to be heard, whether they are scheduled 
for oral testimony or not, will be notified as soon as possible after 
the filing deadline.
      
    Witnesses scheduled to present oral testimony are required to 
summarize briefly their written statements in no more than five 
minutes. THE FIVE-MINUTE RULE WILL BE STRICTLY ENFORCED. The full 
written statement of each witness will be included in the printed 
record, in accordance with House Rules.
      
    In order to assure the most productive use of the limited amount of 
time available to question witnesses, all witnesses scheduled to appear 
before the Committee are required to submit 300 copies, along with an 
IBM compatible 3.5-inch diskette in WordPerfect or MS Word format, of 
their prepared statement for review by Members prior to the hearing. 
Testimony should arrive at the Committee office, room 1102 Longworth 
House Office Building, no later than Monday, May 1, 2000. Failure to do 
so may result in the witness being denied the opportunity to testify in 
person.

WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:

      
    Any person or organization wishing to submit a written statement 
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch 
diskette in WordPerfect or MS Word format, with their name, address, 
and hearing date noted on a label, by the close of business, Wednesday, 
May 10, 2000, to A.L. Singleton, Chief of Staff, Committee on Ways and 
Means, U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Committee office, room 1102 Longworth House Office 
Building, by close of business the day before the hearing.
      

FORMATTING REQUIREMENTS:

      
    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.
      
    1. All statements and any accompanying exhibits for printing must 
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect or 
MS Word format, typed in single space and may not exceed a total of 10 
pages including attachments. Witnesses are advised that the Committee 
will rely on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. A witness appearing at a public hearing, or submitting a 
statement for the record of a public hearing, or submitting written 
comments in response to a published request for comments by the 
Committee, must include on his statement or submission a list of all 
clients, persons, or organizations on whose behalf the witness appears.
      
    4. A supplemental sheet must accompany each statement listing the 
name, company, address, telephone and fax numbers where the witness or 
the designated representative may be reached. This supplemental sheet 
will not be included in the printed record.
      
    The above restrictions and limitations apply only to material being 
submitted for printing. Statements and exhibits or supplementary 
material submitted solely for distribution to the Members, the press, 
and the public during the course of a public hearing may be submitted 
in other forms.
      

    Note: All Committee advisories and news releases are available on 
the World Wide Web at ``http://waysandmeanshouse.gov''.
      

    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      

                                


    Chairman Archer. The Committee will come to order.
    Good morning. The Committee today continues its review of 
what international trade means in the everyday lives of 
farmers, workers, and businesses of this country. Specifically, 
we will further examine the bilateral agreement reached between 
the U.S. and China last year, to make sure that it is good for 
America.
    Winning the China vote is not going to be easy, especially 
since the House Minority Leader is against it and the House 
Minority Whip is devoting enormous amounts of time and energy 
working toward its defeat. In fact, I am at least as concerned 
today as I was four weeks ago about our prospects for winning 
this historic vote.
    I am also concerned about the nature and composition of any 
potential side agreements or parallel legislation being 
discussed. I think we must work to find ways to address issues 
and will be cooperative in that regard with the, I think, very 
constructive efforts of Sandy Levin. We do need to be sure, 
however, that whatever we do in that regard is not trade 
restrictive and should apply to China only.
    We also need to be sure that it will not attract other 
provisions which will bog down the process, particularly in the 
Senate. And we must be sure that whatever we do in that regard 
does not threaten the existing base of support.
    These are questions I hope to have answered today. The 
importance of this issue to our country's future and the future 
of free trade cannot be overstated. The fact that we will have 
four Cabinet officials here today is testimony to that.
    So I hope the President will again consider my request to 
address the Nation on television on this critical issue. He has 
done so on Haiti, Bosnia, Iraq and Kosovo. And I believe he is 
inclined to do so. I know that the President is working very 
hard to get the votes for us to win this issue. And surely when 
the American people hear the importance of this, and hear it 
from the President, I believe that it will help us greatly with 
the American people.
    And having said that, I yield to the chairman of the Trade 
Subcommittee, Mr. Crane, for any comments he would like to 
make, and then I will yield to Mr. Rangel, who will yield, I 
assume, to Mr. Levin.
    Mr. Crane. Thank you, Mr. Chairman.
    It's heartening for me to experience the historic 
bipartisan show of support we've seen for expanding trade 
relations with China. The opportunity Congress has to impose an 
enforceable system of fair trade rules on a nation of 1.2 
billion people, as it emerges from the iron grip of communism 
and state planning, is one that cannot be lost.
    Chairman Archer and I are in agreement with the President 
that the bill to approve permanent NTR status must be a simple 
change to the Jackson-Vanik statute, rather than one which 
attempts to make changes to our trade laws, or which brings in 
other issues and complications. And I agree with the Chairman 
on the criteria for evaluating any parallel legislation.
    The bilateral trade deal with China sells itself in every 
area. In one sector after another, there is no question United 
States workers and businesses will be better off if Congress 
passes the PNTR and puts these unilateral concessions in place. 
In exchange for steep tariff reductions and whole scale reforms 
of the Chinese trading system, the United States gives up 
nothing, gives up nothing.
    In a global economy, increasing trade with China is the 
best way to keep our economy growing and help improve the 
standard of living and human rights conditions in China. We 
will not gain improvement in the respect for rule of law, 
religious freedom, and democratic principles by rejecting this 
agreement and surrendering our presence and influence in China. 
American businesses, religious leaders and unions need to 
remain engaged in China.
    And I look forward to today's discussion and yield back the 
balance of my time.
    Chairman Archer. I now recognize Mr. Rangel for any 
statement he might to make on behalf of the minority.
    Mr. Rangel. Thank you, Mr. Chairman.
    I think we all ought to take a deep breath as we see the 
Republicans and Democrats finding some issue that we can work 
with the President of the United States and hold up on the 
hearings on the Gonzales matter and put impeachment behind us 
and put the country as a priority, as it relates to our trade 
policy.
    I also find it difficult to understand how we can so easily 
agree to engage with a billion communists in China and find it 
so awkward even to talk about normal trade relationships with 
Cuba, which is closer to our borders and certainly has the same 
type of problems in terms of not moving toward democracy any 
faster than the leadership would be in the People's Republic of 
China.
    Having said that, I agree with you that the Administration 
has brought some very important and influential representatives 
here, and I'm very anxious to hear from them. And I should note 
that while Leader Gephardt has taken a position against 
normalization of trade relations with China that he's made it 
abundantly clear that is not a party position for the minority, 
but an individual position.
    And while you accurately pointed out that David Bonior also 
opposes normalization at this point in time, that he too is not 
acting as the whip of the Democratic minority, but is doing 
that as an individual member. And that leads me to laud the 
work that's being done by my friend and colleague, Sandy Levin, 
who has constantly tried to bridge the gap in working with the 
other side. And whether you call them side agreements or trade 
restrictions, you know as I know that he's trying to put 
together a coalition under very difficult political 
circumstances that would allow a degree of unity to support the 
President of the United States.
    And so while it is very important, in my opinion, that 
China does and will be entered into the world trade agreement, 
I think it's important too that while we gain access to this 
potentially lucrative market, that we also find some way to 
enforce the commitments that China has made as it relates to 
human rights or the protection of environment. These things are 
important to Republicans, Democrats and Americans alike, and 
Sandy Levin and a group of Democrats and Republicans are trying 
very hard to reach some type of agreement that can produce the 
votes that are necessary.
    So I publicly thank Sandy Levin for what he's doing, not 
just as the ranking Democrat on the Trade Committee, but as a 
concerned American that would want to do what's in our interest 
and the world's interest. And with your permission, Mr. 
Chairman, I'd like to yield to Sandy Levin.
    [The opening statement follows:]

Opening Statement of Hon. Charles B. Rangel, a Representative in 
Congress from the State of New York

    Mr. Chairman, we have a particularly distinguished list of 
witnesses appearing before us today.
    First, we seem to have most of the President's Cabinet here I'm not 
sure who's left minding the store. Starting with the distinguished 
Secretary of the Treasury we are always privileged to have him before 
our Committee joined by the Secretary of Commerce, the Secretary of 
Agriculture and the U.S. Trade Representative.
    And, if that were not enough, we have the distinguished former 
Secretary of the Treasury, Bob Rubin, following the Administration. 
Finally, we have a number of important private sector witnesses.
    In view of the impressive array of witnesses before us, I will keep 
my opening comments short and then turn my remaining time over to 
Congressman Levin, the Ranking Democrat on the Trade Subcommittee.
    I think the facts before us today are relatively clear.
    As we all know, last November, the Clinton Administration concluded 
an historic bilateral accession agreement with China.
     Based on my understanding of the agreement, it 
would provide substantial new opportunities for U.S. farmers, 
businesses, and workers assuming China lives up to its 
obligations.
     In addition, it contains important safeguards 
under U.S. law including a special anti-surge provision to 
prevent China's centrally-planned production from spilling over 
into the U.S. market and gives affected U.S. industries fair 
recourse in these circumstances.
    Now, the views about the agreement are also clear.
     Business wants access to a potentially lucrative 
market - and I think overall we can agree that in the long run, 
bringing China into the framework of world trading rules is a 
very important objective. It can serve U.S. interests, 
including the interests of U.S. workers and businesses, and 
also strengthen the rule of law within China itself.
     But there are many who have concerns.
     Those concerns include whether China will live up 
to its commitments, and if it does not, to make sure that we 
have in the WTO dispute settlement process an effective means 
to get enforcement.
     Others are concerned that the agreement does not 
address China's egregious labor practices, flagrant violations 
of human rights, or contain protections for the environment.
    Just as the potential benefits are real, so are these 
concerns.
    No one has done more than my colleague Sandy Levin to try 
to address those concerns in an effective, consultative, 
bipartisan way. I want to commend him for his often thankless 
work on this important issue and turn over my remaining time to 
him after one last comment.
    I believe our policy U.S. policy needs to be consistent in 
engaging countries that need to be brought into the mainstream 
of the international system.
    In that regard, I look forward to the day soon, I hope when 
we can begin a serious and substantive discussion of the 
importance and benefits of normalizing economic relations with 
Cuba.
      

                                


    Mr. Levin. Thank you very much, Mr. Rangel and Mr. 
Chairman.
    China's integration into the world trading system presents 
both opportunities and challenges. We need a policy that 
recognizes to both sides of this equation, a policy that seeks 
to take advantage of the opportunities and prepares fully for 
the challenges.
    According to a recent World Bank study, ``China's share in 
world trade could more than triple to 10 percent, making it a 
major engine of growth for world trade.'' China could become 
the second largest trading nation in the world over the next 25 
years. There is no doubt, trade change is underway and 
tremendous change is underway in China. But while that change 
is irreversible, its direction is not inevitable.
    China is the world's largest state controlled economy where 
markets, free markets and the rule of law are still in the 
rudimentary stages of development. China has a tight one party 
system with a record of gross human rights violations and the 
absence of a free labor market.
    During my trip to China in January, I asked everyone I met, 
students, academics, entrepreneurs, intellectuals, artists, a 
few questions to sense their basic feelings about China's 
future. One person very poignantly said to me, I could never 
have imagined 10 years ago we would be where we are today. I 
cannot predict where we might be in another 10 years.
    We, too, are not able to predict China's future. But as the 
President said in the State of the Union address, we need, ``to 
know we did everything we possibly could to maximize the chance 
that China will choose the right future.''
    Over the last three months, the picture has become clearer, 
and our response much more critical. The U.S. cannot block 
China's entry into the World Trade Organization. The U.S. also 
cannot receive the full benefits of the agreement we ourselves 
negotiated with the Chinese without granting PNTR. In my 
judgment, we cannot simply say no.
    At the same time, just increasing trade does not adequately 
address the complex challenges presented by China. We cannot 
rely on economic contact and exchange alone to automatically 
lead to more democracy, greater freedom and greater enforcement 
of core worker rights. We cannot expect potential economic 
dislocations in our country to just eventually correct 
themselves. We cannot simply say yes.
    In my judgment, the only course is to actively shape 
globalization. We cannot escape it, we cannot ignore it. We 
must engage with China and we must confront it. We should 
consider PNTR within a framework that has the following three 
goals. One, maximized benefits to U.S. businesses and workers 
and farmers from China's accession to WTO. Two, minimize the 
potential downsides from growing and more intense competition, 
and there will be, with a country where free markets and the 
rule of law are still in early stages of development. And 
three, and so importantly, keep the heat on China when it comes 
to human rights and other dimensions of our relationship.
    With respect to the first goal-maximizing the benefits of 
China's WTO accession. I believe that strong monitoring and 
enforcement are keys to success. In that spirit, the framework 
includes several important provisions, the framework we've been 
working on. It calls for increased resources to be allocated to 
U.S. Government agencies assigned to monitor and enforce trade 
agreement compliance by China and other foreign countries. It 
provides for an annual review by USTR of China's compliance 
with its WTO obligations. And it calls on the U.S. 
administration, and this is so important, to press for an 
annual review by the WTO itself.
    It also establishes a congressional executive commission 
which will have among its functions review of worker rights in 
China. All of this is in addition to the enhanced enforcement 
that will come from bringing China into a system that has as 
its foundation closer ongoing scrutiny which must be increased, 
as well as a strong dispute settlement mechanism.
    With respect to the second goal, minimizing the potential 
downside from growing and more intense competition from China, 
the framework would put into U.S. law the strong anti-import 
surge safeguard that was included in the U.S. China agreement. 
Obtaining that safeguard, which had not been obtained as of 
April 1999, was vital to reaching agreement in November. Now it 
is time to seal that achievement, as we did in implementation 
of the Uruguay Round provisions, by legislating the standards 
and procedures to make the safeguard a useful tool for U.S. 
businesses and workers.
    With respect to the final goal, the third goal, keeping the 
heat on China on human rights and other areas, the framework 
includes a significant improvement over the current system of 
reviewing China's issues for a day or two each week. The 
proposal is, we create a congressional executive level 
commission, modeled after the Helsinki Commission. In the last 
quarter century, that commission made major strides in 
improving human rights and cultivating democratic institutions 
in the country of the former Soviet block.
    I believe a similar commission for China could make equally 
important strides. That commission will place an ongoing and 
focused spotlight on China rather than the temporary and 
diffused spotlight of an annual review. The proposals that have 
been put forth constitute a hard headed and common sense 
approach to bringing China into the world trading system. I 
would be strongly urging their adoption even if the dynamics of 
the PNTR vote were different than they are today. I would be 
doing so, because I firmly believe that we must actively shape 
globalization and not simply rely only, as important as it is, 
on more open markets to bring about positive developments.
    I have no illusions, in conclusion, that enacting the 
framework that I've outlined will transform China overnight. 
But it will help to reinforce the evolution of China's 
economic, social and political institutions in a positive 
direction. It will be a step by step activist approach. This 
type of reinforcement is not only in China's interest, it is in 
our vital economic and national security interest as well.
    I look forward to the Administration's views today on these 
proposals, as well as the continuing and continued discussions 
as mentioned by others on both sides of the aisle about their 
implementation in the context of a PNTR bill.
    Mr. Chairman, thank you, and Mr. Thomas has asked if I 
might yield to him for a few seconds.
    Mr. Thomas. Thank the gentleman for yielding. And I want to 
thank the gentleman for the language and our ability to look, 
and my ability to look at it prior to your statement.
    And the specificity is of a great help. I think 
conceptually there are a number of areas that we can agree and 
move forward on, perhaps in some areas on terminology or 
structure, we can continue to work on it. But the willingness 
of the gentleman to continue to flesh out and show the 
specifics of his approach is appreciated. I think there is a 
fertile ground for us to continue to work, and I thank the 
gentleman for his statement.
    Mr. Levin. Thank you, Mr. Chairman.
    Chairman Archer. Without objection, all members may insert 
written statements in the record at this point.
    [This opening statement of Mr. Ramstad follows:]

OPENING STATEMENT OF THE HON. JIM RAMSTAD, A REPRESENTATIVE IN CONGRESS 
FROM THE STATE OF MINNESOTA

    Mr. Chairman, thank you for calling this important hearing 
on China's accession to the WTO.
    We often talk about what China's accession to the WTO means 
in relation to permanent normal trade relations (PNTR) for 
China, but today, I would like to draw attention to what this 
crucial step will mean to the Chinese citizens and why the 
average Chinese citizen supports it.
    On Monday, four Chinese citizens who work for an American 
company in China, Honeywell, were in my office. They were asked 
questions about the differences between working for U.S. firms 
and the Chinese state-owned enterprises. The differences are 
stark.
    They explained how the working conditions at American firms 
far exceeded those of the state enterprises. The U.S. firms are 
not only utilizing U.S. labor and environmental standards at 
their facilities, but they are also requiring companies with 
which they do business--whether it is a Chinese or foreign 
company--to also meet these high standards. It is U.S. firms, 
not the Chinese government, that are pushing for better working 
and environmental conditions!
    A Chinese employee explained how important the housing 
benefits are at American firms, which allow them to actually 
own their own housing. Another mentioned how much more training 
is provided at U.S. companies, and that salaries and benefits, 
which are tied to merit, are helping to motivate workers in 
ways never imagined at the government enterprises.
    A Chinese employee who has worked at both the government 
enterprises and American companies also explained that the 
salaries are far better at the American firms. He said his 
salary now is 1000 times higher than what he made when he first 
started working at the government enterprise. His salary is 
also almost 15 times the amount of a friend of his who does a 
similar job at a government factory.
    Better working conditions, better benefits and incentives 
and better salaries--these greatly improve the lives of Chinese 
citizens. That's why we must support bringing China into the 
WTO and passing PNTR so we can promote continuance of these 
positive opportunities and influences in China.
    Thank you again, Mr. Chairman, for holding this hearing and 
I look forward to hearing from our witnesses today.
      

                                


    Our first witness is one of our own colleagues, Congressman 
Frank Wolf from Virginia. Frank, if you'd take a seat there at 
the witness chair. We're happy to have you before the 
Committee, and we'll be pleased to receive your testimony.

 STATEMENT OF HON. FRANK R. WOLF, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF VIRGINIA

    Mr. Wolf. I thank you, Mr. Chairman. I'll submit my full 
statement and sum up. And I want to thank you and the members 
of the Committee, for the opportunity to testify.
    The Clinton Administration has a very poor record on human 
rights around the world. In Africa, in Sudan, 2 million 
Christians and animists have been killed and slavery is taking 
place. In Sierra Leone, 90,000 people have been killed and 
women are raped and arms are taken off. In Rwanda, they stood 
by and did nothing. In Chechnya, during the bombing, innocent 
people have died. In Indonesia, when Bishop Bella won the Nobel 
Peace Prize in East Timor, the Administration stood by and did 
nothing.
    So it's not surprising to see its policy with regard to 
China. In the Simon and Garfunkel song, The Boxer, it says, I 
am just a poor boy, though my story's seldom told, I have 
squandered my resistance for a pocket full of marbles, such are 
promises, all lies and jests, still a man hears what he wants 
to hear and disregards the rest.''
    You've heard the Administration and you've heard about 
trade. So I'd like to talk a little bit about the rest. In 
China today, there are at least eight Catholic bishops that are 
in jail and the number is actually higher. There are numerous 
Protestant house church pastors that have been arrested and one 
in the photo here is the bishop in jail still, and Pastor Li in 
the photo here was arrested and has put in prison in China.
    The Chinese have plundered Tibet. Three years ago I was in 
Tibet. I went in through the back door, and saw what they have 
done, destroying 3,000 to 4,000 monasteries. And every 
monastery has public security police that run the monastery. 
They have hundreds of monks and nuns in the Dropshe prison that 
are being tortured. They have persecuted the Muslims in the 
northwest portion of the country.
    There are more slave labor camps in China today than there 
were when Solzhenytsin wrote the book, Gulag Archipelago. The 
People's Liberation Army kills people to sell organs for organ 
transplantation. Many of the Tiananmen Square demonstrators are 
still in prison. Chris Smith and I visited in Beijing Prison, 
number one, we saw them working and many are still in prison 
today.
    Fifty-five years ago last month, Dietrich Bonhoeffer was 
marched from his cell in the Flossenburg prison, taken to the 
gallows because of speaking out for human rights. We now have 
modern day Dietrich Bonhoeffers who serve in prison in China. 
And this Administration and this Congress is doing nothing 
about it.
    There are forced abortions. This is a pro-life issue, a 
women's issue. They have mass sterilizations as they go into 
villages. Over 500 women a day commit suicide in China. 
Militarily, they sell weapons to countries that are a direct 
threat, not only to the security of the United States, but to 
our men and women who wear the uniform. They have an espionage 
program directed against the United States and private 
companies.
    I would urge the Committee to get the security briefing by 
our intelligence people. Ask them how broad ranging is China's 
intelligence operation in the U.S. Will giving PNTR to China 
allow China greater access to sensitive technology? Is there 
evidence that China has a program underway to attack U.S. 
satellites in space? Does the intelligence community have any 
written evidence that China is preparing to sink U.S. aircraft 
carriers?
    The human rights record in China today is worse than it has 
been for years. Giving China MFN, or PNTR, will not change 
them, just as giving it to Nazi Germany would not have changed 
the leaders of Nazi Germany.
    With that, Mr. Chairman, I would also, since I have 46 
seconds, read you a letter from the Fleet Reserve Association 
that represents 150,000 career military Marines and Coast 
Guard. They say, the Fleet Reserve Association must do all that 
it can to oppose any move that could possibly send those brave 
men and women into harm's way without rhyme or reason, with the 
possibility that the future will hang dark shadows over open 
end trading with yet another unproven China. FRA is sensitive 
to the harm that country may inflict upon our nation and joins 
your colleagues in opposing PNTR.
    Just within the past two weeks, China has made military 
threats against Taiwan and threatened military actions against 
the U.S. On this issue, Congress should respect the wisdom of 
the American people. Now is not the time to grant PNTR to 
China.
    [The prepared statement follows:]

STATEMENT OF THE HON. FRANK R. WOLF, A REPRESENTATIVE IN CONGRESS FROM 
THE STATE OF VIRGINIA

    Mr. Chairman, thank you for the opportunity to testify 
today.
    Having visited prison labor camps in China in 1991 and 
having visited Tibet a few years ago, I firmly believe that 
much is at stake if the Congress abandons its annual review of 
China trade. Much is at stake if the Congress ignores China's 
continuing human rights violations. Much is at stake if the 
Congress ignores the national security threat arising out of 
Beijing.
    China's human rights record is deplorable and it continues 
to worsen. That's not just me saying that. The 1999 State 
Department Human Rights report on China said, ``The 
Government's poor human rights record deteriorated markedly 
throughout the year, as the Government intensified efforts to 
suppress dissent.''
    On May 1, 2000, the United States Commission on 
International Religious Freedom released its first report on 
international religious freedom.
    This is a timely report. Its language and recommendations 
about whether the U.S. should give China Permanent Normal Trade 
Relations (PNTR) are important in considering whether or not it 
is appropriate at this point in time to give China PNTR.
    The Commission ``. . .believes that Congress should not 
approve PNTR for China until China makes substantial 
improvements in respect for religious freedom. . .'' Right 
smack in the middle of this debate on PNTR, the Chinese 
government continues to arrest and imprison people because of 
their faith.
    It was 55 years ago Sunday, April 9, that Dietrich 
Bonhoeffer was marched from his prison cell at the Flossenburg 
concentration camp in Germany and was hung. Bonhoeffer was a 
Protestant minister who opposed Hitler. He refused to keep 
silent about the discrimination and persecution of the Jews. He 
spoke out repeatedly and fearlessly until the Nazis executed 
him.
    Many Protestant house church leaders, pastors, Catholic 
bishops, and priests in China are modern day Dietrich 
Bonhoeffers. Dietrich Bonhoeffer suffered in prison for two 
years--from April 1943 to his death almost exactly two years 
later.

[GRAPHIC] [TIFF OMITTED] T7832.001

    This is a photograph of Bishop Peter Joseph Fan Xue-Yan. 
Bishop Fan died in a Chinese prison as a result of torture and 
physical abuse carried out against him in prison. Bishop Fan 
was imprisoned by the Chinese government in 1958 and held there 
for 34 years because of his loyalty to the Pope. In April 1992, 
security officers returned his frozen and broken body in a 
plastic sack. The autopsy showed that he died as a result of 
torture wounds suffered in prison.

[GRAPHIC] [TIFF OMITTED] T7832.002

    Here is a picture of Protestant House church leader, Pastor 
Li Dexian, getting arrested by Chinese authorities. Pastor Li 
has been arrested over 13 times since last October and has been 
persecuted by the Chinese government for the past 10 years. He 
was beaten in 1995 by the police around the head and neck with 
a Bible in an apparent attempt to break his windpipe, and then 
beaten with an iron bar and jumped upon, causing him to vomit 
blood and leaving him with broken ribs.

[GRAPHIC] [TIFF OMITTED] T7832.003

    This picture here is of Catholic Bishop Zeng Jingmu. He has 
spent almost 35 years in Chinese prisons since 1955. He was 
released from jail in 1998 and is now under strict house 
arrest. At this point in life, he is very sick and is over 80 
years old.

[GRAPHIC] [TIFF OMITTED] T7832.004

    This picture to above is of Catholic Bishop An Shuxin who 
disappeared and then was discovered to be in prison. Bishop An 
has been in and out of prison in China, because of his faith, 
since 1982. Bishop An is currently in prison and was only 
released for one hour to visit his invalid 90-year-old mother. 
Bishop An's present location is unknown.

[GRAPHIC] [TIFF OMITTED] T7832.005

    The Chinese regime continues to plunder and occupy Tibet. 
Hundreds of Tibetan monks and nuns continue to be imprisoned 
and brutally tortured. Monasteries and nunneries continue to be 
destroyed. Those that remain open are under heavy surveillance 
(see photo at above in Lhasa and look for the surveillance 
cameras) by cadres of Chinese communist party officials. China 
continues to coerce the Tibetan people to accept the Beijing-
appointed Panchen Lama instead of the young boy identified by 
the Dalai Lama, Gendhun Choekyi Nyima. Chinese authorities 
reportedly have detained the parents of the 14-year old 
Buddhist leader, the Karmapa Lhama, who recently fled China to 
India.
    China continues to use prison/slave labor. There are more 
gulag prisons in China today than in Russia when Alexander 
Solzhenitzen wrote the Gulag Archipelago. Over 200 Tiananmen 
square protestors are still in prison or forced labor prison 
camps or are on medical parole; many have spent more than ten 
years in prison because of their advocacy for democracy in 
China.

[GRAPHIC] [TIFF OMITTED] T7832.006

    This is a photograph of a Chinese prison labor camp I 
visited in 1991 with Representative Chris Smith.
    We visited Beijing Prison No. 1 and learned that at least 
40 Tiananmen Square protestors were imprisoned there. We asked 
to speak with them but our request was denied. Instead, we were 
taken on a tour of the prison's textile and plastic shoe 
manufacturing facility. I obtained socks manufactured in the 
prison, some of which were provided to the U.S. Customs Service 
for thread and dye analysis to determine if they are being 
imported into the U.S.
    The Peoples Liberation Army is responsible for trafficking 
in human organs. People in need of organ transplants are 
matched with prisoners serving sentences in Chinese prisons who 
have their blood-type taken by the Chinese authorities. When a 
match is made, prisoners are taken to a remote location where 
the necessary medical personnel have been assembled, and 
summarily executed. Their organs are then removed and quickly 
transported to the waiting organ recipient.
    he Chinese government carries out policies of forced 
abortion and forced sterilization. The 1999 State Department 
Human Rights Report on China says that some 56 percent of the 
world's female suicides occur in China (about 500 per day), 
most are of child bearing age. The fines for violating 
government birth quotas are three times a couple's annual 
salary.
    A country that abuses its own citizens on a massive scale 
cannot be trusted in its dealings with the U.S. Do Members 
actually think that the same Chinese government that flattens 
its own citizens with tanks--that kills frail 80 year-old 
Catholic bishops--can be trusted?
    Human rights isn't my only concern, though. I am also 
opposed to giving China PNTR out of concern for national 
security. Congress cannot ignore the national security threat 
emanating from China. We hear the argument that PNTR will lead 
to economic and political growth in China, but who in China 
will benefit the most from increased foreign investment? Much 
of the capital and revenue the Chinese would gain from PNTR 
will go to help increase China's military build-up and to help 
stabilize a repressive, authoritarian regime.
    I'd suggest the money is going to go toward building more 
jails and more prison labor camps, toward more weapons 
purchases and toward funding more intelligence operations 
against the U.S.
    We know that this year, China has reportedly increased its 
military budget by close to 13 percent.
    In 1999, China's Defense Minister declared that war with 
the U.S. ``is inevitable.'' It is estimated that China has over 
a dozen nuclear ballistic missiles aimed at major U.S. cities 
and is reportedly building three new types of long-range 
missiles capable of striking the U.S.
    Less than one year ago the Cox Committee found that China 
has ``stolen'' classified information regarding the most 
advanced U.S. thermonuclear weapons, giving them design 
information ``on par with our own.'' The information included 
classified information on every currently deployed warhead in 
the U.S. ballistic missile arsenal.
    China's official military newspaper threatened the U.S. 
saying if the U.S. were to defend Taiwan, China would resort to 
``long range'' missiles to inflict damage on America.
    China has exported weapons of mass destruction and missiles 
in violation of treaty commitments. The director of the CIA has 
said that China remains a ``key supplier'' of these weapons to 
Pakistan, Iran, and North Korea. Other reports indicate China 
has passed on similar weapons and technology to Libya and 
Syria. If one of these countries is involved in a conflict, it 
is very possible that our men and women in uniform could be 
called into harm's way. These weapons of mass destruction could 
then be targeted against American troops.
    Incidences of technology transfers from the U.S. to China 
have been numerous.
    A recent report issued by the CIA and the FBI stated that 
China has stepped up military spying against the United States 
while using political influence programs to manipulate U.S. 
policy. This FBI/CIA report says that the U.S. military and 
U.S. private corporations are the primary targets of Chinese 
intelligence. This report also says that Chinese companies play 
a significant role in China's pursuit and acquisition of secret 
U.S. technology.
    I am concerned that Members of Congress and the American 
public do not know enough about the national security threat 
that China poses to the U.S. I have been urging our colleagues 
to obtain a briefing by the CIA on China. I've had the briefing 
and what I learned has solidified even more my concern about 
the U.S. yielding permanent trade status to China.
    Members and the American public need to know the answers to 
questions about the national security concerns regarding China 
and PNTR.
     Have U.S. exports over time contributed to China's 
nuclear weapons development, missile delivery systems, 
intelligence gathering, electronic warfare, power projection, 
anti-submarine warfare, encryption capabilities, and low-
observable technology?
     Will giving PNTR to China allow China greater 
access to sensitive U.S. technology?
     Have U.S. exports to China contributed to the 
development of the Chinese military's command, control, 
communication, computer, and intelligence capabilities?
     Has China written that the U.S. is its main enemy?
     I understand that China has a defense treaty with 
North Korea and that this treaty might have secret 
implications. If the event of 1950 were to happen again, what 
would China do?
     Does the intelligence community have any evidence 
that China is preparing to sink U.S. aircraft carriers?
     Is there evidence that China has a program 
underway to attack U.S. satellites in space?
     Is China continuing to export weapons of mass 
destruction which could be used against American troops?
    In closing, I am concerned that we in the U.S. have become 
so enamored with China's prospective market, that we are on the 
verge of ignoring history, of ignoring China's abysmal human 
rights record, and of ignoring the threats China poses to U.S. 
national security and to our men and women in uniform.
    The U.S. should not give China PNTR until there is 
significant improvement in China's human rights record and 
until questions of national security have been adequately 
addressed.
    We must have a way to continue our annual review of trade 
with China. If we sign off on permanent trade, we hand over any 
influence we could have in promoting a China that respects its 
citizens and that is a non-threatening member of the community 
of nations.
    The process of reviewing trade relations with China each 
year is an opportunity for Congress to influence the behavior 
of China on matters of national security and human rights. 
Annual review of China's trade status is an appropriate foreign 
policy tool and it is the right thing to do.
      

                                


    Chairman Archer. Thank you, Mr. Wolf. Without objection, 
your entire printed statement will be included in the record.
    Mr. Wolf. Thank you, Mr. Chairman.
    Chairman Archer. Does any member wish to inquire? Mr. 
Stark.
    Mr. Stark. Frank, thank you for your testimony. I know this 
is a matter of which you studied for many years.
    Are you familiar with the United States Commission on 
International Religious Freedom? And if you are, and the report 
that they issued a couple of days ago? Could you summarize how 
that commission came into being and who's on it and what their 
report says?
    Mr. Wolf. That is a bipartisan commission that was voted on 
by every member of this House. And Rabbi Saperstein is the 
chairman of the commission. And on a unanimous vote the other 
day, and they voted in opposition for PNTR unless a series of 
things have been done.
    So this is the conclusion of the commission, voted on by 
every member of this House and every Senator, they opposed 
granting PNTR at this time.
    Mr. Stark. Who is appointed to that commission?
    Mr. Wolf. There are a series of people who are appointed to 
the commission. It's chaired by Rabbi Saperstein. It has 
Republicans and Democrats and people who are Muslim, people who 
are Protestant, people who are Catholic, people who are Jewish, 
and people who are broad based.
    The members are Rabbi David Saperstein, the chairman, Dean 
Michael K. Young, the vice chairman, from George Washington 
University, the Honorable Elliott Abrams, Laila Al-Marayati, 
M.D., the Honorable John R. Bolton, who served in the Reagan 
Administration, and you know, Ronald Reagan never gave MFN to 
the Soviet Union. The fact is, in 1987, he signed a bill to 
take MFN away from Ceaucescu's remaining government.
    Archbishop McCarrick from New Jersey, Nina Shea with 
Freedom House, Justice Charles E. Smith, and the ex officio 
member is Ambassador Robert Seiple.
    Mr. Stark. It's my understanding that those members of the 
commission were all appointed by various elected officials who 
support giving most favored nation to China, is that correct?
    Mr. Wolf. That's correct.
    Mr. Stark. So the commission was created by us, and the 
commissioners were appointed by people who the Administration's 
position on PNTR, and they unanimously recommend to us that we 
at least postpone granting it, is that the basis?
    Mr. Wolf. That's correct.
    Mr. Stark. Thank you, Mr. Chairman.
    Mr. Doggett. Mr. Chairman?
    Chairman Archer. The gentleman from California yielded to 
the gentleman from Texas.
    Mr. Doggett. I ask for my own time, if I might.
    Chairman Archer. The gentleman is recognized.
    Mr. Doggett. Thank you.
    Frank, thank you very much for the leadership you've played 
on this human rights issue. I serve on the Congressional caucus 
on human rights with you, and I think it's very important to 
focus attention on this issue. I believe that the effects of 
this agreement have been greatly exaggerated by both the 
advocates and the opponents of the agreement generally. But I 
don't see how anyone can look at the human rights situation in 
China and feel that it has improved in the last few years, 
particularly within the last year.
    I guess as someone who is firmly uncommitted on this vote 
at the moment, I'd like to ask you, given the fact that there 
has been deterioration in the situation with human rights in 
China, how can we say that the process of annual renewal, 
rather than giving China the permanent trading relationship we 
enjoy with almost every other country in the world has a 
potential to make it any better? Isn't it a pretty blunt 
instrument to use to address the human rights problem?
    Mr. Wolf. The failure has been the Administration's to 
speak out. We used to have a bipartisan position on human 
rights. Ronald Reagan gave the speech in 1983, if you recall, 
where he took on the human rights issue. Chris Smith and I were 
in Perm Camp 35 in 1989, and actually spoke to Sharansky's 
cellmate. They told us that every time that Ronald Reagan and 
the Congress spoke out on these issues that the people in the 
Gulag, the people in the Perm, and talk to Nathan Sharanski, 
and talk to Elena Bonner and talk to Sakharov, will tell you 
that their life got better. Sharanski will tell you.
    And the failure has been of this Administration from Rwanda 
to Chechnya, to East Timor, they have done nothing. And 
hopefully, whatever man wins the Presidential election, that 
man will be hopefully a person who will speak out. So with this 
annual review and with a president that will voice and speak 
out and speak truth to the powerful, there is an opportunity 
for the cells to open up.
    Who would have thought in 1985 that we would have seen in 
1991 the Berlin Wall to fall down. How did the men in the Perm 
and the Gulag know of Ronald Reagan's speeches? And when in 
1987, we took away MFN from Romania, the peasants knew of what 
we had done. So the failure has been this Administration's 
weakness on human rights and religious freedom.
    Why has the Administration never spoken out with regard to 
the Catholic bishops? The torture--here is a bishop born 
December 29, died a martyr, ordained priest. His body, in 1992, 
press reported that government officials had hesitantly 
assigned the April 13 as stated death. His body was sent back 
in a frozen body plastic sack. Chris Smith gave holy communion 
to Bishop Shu, a Catholic bishop. Bishop Shu is still in jail 
for giving Congressman Smith holy communion.
    And the next Administration, whether it's Gore or Bush, 
hopefully it will be. Bush, will speak out and there will be a 
time that we can give them permanent MFN. I am a free trader. I 
voted for NAFTA. I am an internationalist.
    I supported the bombing in Kosovo. I was one of 33 
Republican members on my side. I supported the troops being 
sent to Bosnia. I have actually argued for more foreign aid in 
certain areas than most people on my side of the aisle. This is 
not only a trade issue, it's a religious freedom and a human 
rights issue. So with an administration that speaks out, then 
this annual review can make a tremendous difference.
    Mr. Doggett. Why couldn't we achieve the same kind of 
annual review through the separate human rights review 
mechanism that Congressman Levin has been advancing?
    Mr. Wolf. President Reagan never gave MFN to the Soviet 
Union, he never gave it to any East Bloc nation, and actually 
signed a bill to take it away from Romania. Sanctions on South 
Africa brought about the end of apartheid. The inconsistency, 
and one of the persons mentioned with regard to Cuba and China 
and the church and apartheid, is unbelievable.
    So I think you need, annual review. This is something the 
Chinese understand. And when this vote takes place, the word 
will go into the prison camps and the Gulag camps and the slave 
labor camps that this Administration and this Congress either 
granted PNTR, whereby they don't care, or they didn't grant it, 
whereby there's hope, and hope springs eternal.
    So I think to deny PNTR this year, bring a new 
administration in, pass something that's decent and then maybe 
at that time you can do it. But not now.
    And workers' rights, one other thing, for those that are 
interested in workers' rights, we saw 40 Tianamen Square 
demonstrators in Beijing Prison number one working on socks 
that were for export to the United States. And these are the 
socks.
    And in the socks that we picked up off the line in Beijing 
Prison Number One, there are golfers on the side, and they 
don't play golf. These socks were made by people who were in 
Tiananmen Square, and they are now for export to the west.
    Mr. Doggett. Thank you, Frank.
    Chairman Archer. The gentleman's time has expired.
    Mr. Matsui.
    Mr. Matsui. Thank you, Mr. Chairman. I'll be brief.
    Frank, I would just like to point out that President 
Clinton is actually following decades of bipartisan foreign 
policy with respect to China. I might just point out, I'm sure 
you're aware of this, and I think everyone else is as well, but 
it bears sometimes repeating that after Tiannamen, I believe it 
was in June, about three months later, if you recall, Mr. 
McFarland, Mr. Scowcroft and Mr. Eagleburger, Mr. Eagleburger 
at that time was Secretary of State, Mr. Scocroft was National 
Security Advisor. They did go to China and met with the 
president premier of China and actually toasted them, if you 
recall. Those were national photos throughout the world that 
were represented.
    So I'd just like to point out that was a bipartisan--
    Mr. Wolf. That was a dark day. That was a dark day.
    Mr. Matsui. If I may finish. A bipartisan support of 
foreign policy. And secondly, I might point out that both 
candidates running for president, and I understand those are 
the only two, the Republican and Democrat, that really have a 
chance of winning, not Mr. Buchanan, do favor PNTR.
    And let me just ask this one question. I respect where 
you're coming from and certainly I do admire, over the years, 
your support and strong feelings for human rights. One concern 
I have, however, the opponents of PNTR, besides opposing PNTR, 
have not come up with a positive strategy on how we change 
China's behavior. And you know, outside of perhaps declaring 
war on China.
    So perhaps somebody can give me a help and a hand as to 
what approach we should be taking. Because those of us that 
support this look for engagement. We think that engaging China 
in some way might move in the direction of a more open society 
and hopefully a society that one day will grant more freedoms 
to its citizens. But by being negative, how does that actually 
change China's behavior, and how does that make China a better 
country in terms of part of the international community? It's 
easy to say no. It's another thing to come up with a positive 
strategy on how we change behavior.
    Mr. Wolf. Well, I would say that Ronald Reagan had a 
positive strategy that worked very, very well with the Soviet 
Union and the East Bloc. And when you look at those who are 
opposed, I hope you read the letter from the Catholic 
Conference, Cardinal Bishop Law, with regard to this issue. The 
Catholic Conference is a group that I know every member has 
great respect for. They have consistently in this time opposed 
granting MFN or PNTR.
    I think it takes an administration, whether it be a Gore 
administration or a Bush administration, and obviously I hope 
it's a Bush administration, that will speak out the way that 
Ronald Reagan did, the way that Jimmy Carter did. You talk 
about bipartisanship, there was bipartisan. Ronald Reagan and 
Jimmy Carter spoke out on this and did more to help with regard 
to human rights than the administrations that followed 
thereafter.
    Mr. Matsui. Well, if I may just conclude, Mr. Chairman, one 
of the concerns I have, and bear in mind that six months after 
Ronald Reagan left office, and you know, I would imagine he did 
influence China's behavior, Tiannamen Square did in fact occur. 
So I think China's behavior was not necessarily influenced by 
the rhetoric of President Reagan.
    So obviously, that didn't work so well either. But I yield 
back the balance of my time.
    Chairman Archer. Mr. Kleczka.
    Mr. Kleczka. Thank you, Mr. Chairman.
    Mr. Chairman and members, I'm one of those who are 
undecided as to whether or not to support PNTR, the permanent 
trade status for China, or the annual. The Chairman of the 
Committee starts out this hearing by blasting two Democrats who 
happen to be opposed to granting permanent trade status. In a 
unique feature of the hearing, the first person to testify is a 
Republican who has the same view.
    And I bring that up, Mr. Chairman, because I don't believe 
what we're talking about today is a partisan issue. It's one 
that goes above partisan politics. So for anyone here to 
chastise one side or the other I don't think gets to the heart, 
the purpose of the hearing, and that is to help those of us who 
are undecided try to make a decision on it.
    My colleague, Mr. Wolf from Virginia, starts off his 
testimony by blasting the hell out of the Administration. Well, 
I don't think that helps much on the vote on China, either. 
Because I think we're here to talk about whether or not this 
Congress should grant permanent trading status to China. We 
know full well they're going to enter the World Trade 
Organization with or without us.
    So Mr. Wolf, the question I have of you, and you've heard 
the same arguments and the same comments prior to you making up 
your mind, is that now the United States has negotiated a trade 
agreement with China. And if in fact we do not grant permanent 
trading status, we will not be able to avail ourselves to the 
benefits of that trade agreement.
    How do you respond to individuals and groups that come to 
you with that argument?
    Mr. Wolf. I would respond this way. And let me just 
stipulate, there are good and decent people on both sides of 
the issue. And I was equally critical of the Bush 
Administration for its policies with regard to China.
    Secondly, I think you can give them temporary NTR and come 
back next year with a new president and look at it again. 
Thirdly, in answer to all the questions, I want to read this 
thing. In 1973, this was from Chuck Colson, he said, President 
Nixon sent me to Moscow to negotiate for the release--
    Mr. Kleczka. No, no, no--
    Mr. Wolf. This is the answer.
    Mr. Kleczka. Frank, the question is, how do you respond to 
groups when they say, here we've negotiated this very admirable 
agreement with China, it's going to be pro-business, pro 
whatever else, and if we don't give them permanent, we're not 
going to avail ourselves to it. How do you respond to that?
    Mr. Wolf. You can avail yourself with temporary. You can do 
it on a year to year basis, and the next administration can 
deal with this in a fresh way and speak out on behalf of human 
rights. And behalf of the people in the church, the slave labor 
camps and others.
    Mr. Kleczka. So you're saying that if in fact we do at some 
point this session grant only annual temporary trade status, we 
can avail ourselves to all the benefits of the trade agreement?
    Mr. Wolf. That's correct.
    Mr. Kleczka. Okay, well, Ambassador Barshefksy was before 
the Committee some months ago and indicated that was not 
accurate.
    Now, my question is one probably more of procedure, Frank. 
If in fact on the 22nd the House does not vote in favor of 
permanent trade status, at what point will we have another vote 
before us to grant the temporary or the annual trade status? 
Will that come normally in June or July?
    Mr. Wolf. That would depend on the leadership of the 
Congress to bring that up.
    Mr. Kleczka. So there would be another proposal, another 
resolution coming before the House to deal with that 
specifically?
    Mr. Wolf. I cannot speak for the leadership. That would be 
the leadership, I would hope that would be the leadership 
choice, to do that.
    Mr. Kleczka. But we will have to take another vote at some 
point.
    Mr. Wolf. That's correct.
    Mr. Kleczka. Okay, thank you very much, Mr. Chairman.
    Chairman Archer. Mr. Thomas.
    Mr. Thomas. Briefly, I want to thank the gentleman from 
Virginia for his statement. But I also want to recognize our 
former colleague from Florida, the former chairman of the trade 
subcommittee, Sam Gibbons. Given his long, hard work--
    [Applause.]
    Mr. Thomas. While he's not here, he's here in spirit, and I 
want to thank him.
    Chairman Archer. I say to my friend from Wisconsin, in my 
opening statement I did not take a partisan blast at anyone. In 
fact, I heavily complimented the President for his activities 
and cited that it is good for us to be working together. But 
this will be a difficult issue. It is not going to be easy to 
get the necessary votes to pass this.
    And it is a matter of fact that the top two leaders in the 
House on the minority side are opposed. And they are in a 
leadership position.
    Mr. Kleczka. Will the gentleman yield?
    Chairman Archer. Congressman Wolf is expressing his own 
views, which are very fervently held and very genuine, and a 
man of great conscience. But he, every single one of the 
Republican leaders in the House of Representatives is for 
passing permanent NTR for China.
    And it is not easy for my Democrat colleagues when their 
two top leaders are opposed to it. That just happens to be a 
fact. It's not a blast at anybody.
    Mr. Kleczka. Well, but Mr. Chairman, would you yield on 
that?
    Chairman Archer. Thank you very much for your testimony.
    Mr. Wolf. Thank you, Mr. Chairman. I thank the members very 
much.
    Chairman Archer. We always appreciate hearing from you.
    Mr. Kleczka. Will the Chairman yield?
    Chairman Archer. I'll be happy to yield.
    Mr. Kleczka. Mr. Chairman, I don't intend to belabor the 
point, but it seems quite odd that--
    Chairman Archer. But the gentleman is belaboring the point.
    Mr. Kleczka.--but I'm going to, because I think it's only 
fair to do so. And state to the Chairman, to single out two 
Democrats, regardless of their title, I think they're still 
voting as individual members of Congress, representing their 
district. And I ask the Chairman, how many Republicans are you 
aware of who are not supporting this proposal? We just had the 
lead witness today, a Republican, start out who is opposing. 
How many Republicans are opposing this permanent trade status 
with China?
    Chairman Archer. This colloquy is not going to serve any 
constructive purpose.
    Mr. Kleczka. Well, the fact is there's probably 50 to 75 
Republicans--
    Chairman Archer. I simply want to reiterate that I did not 
blast anyone in my opening statement. And we now need to get on 
to what is really an historic event for this Committee, because 
we have four Cabinet level officials who will be witnesses in 
our next panel.
    I don't recall any time when the Committee has had four 
Cabinet level officials at one time before the Committee, 
demonstrating the importance and the significance of this 
issue. And the Chair heartily welcomes each of those officials. 
And I see you're taking your seats at the witness table. We're 
delighted to have all four of you. And I'm sure that is a 
bipartisan welcome to all four of you this morning before the 
Committee. [Laughter.]
    Chairman Archer. So normally we have members of the 
Committee who say, gee, let me introduce a witness. I don't 
think any one of you needs an introduction to this Committee. 
So let me say as a preface that Secretary Summers, I 
understand, has got to leave here at 12:00 o'clock. And so I'm 
going to recognize you one after another and then in the 
questioning, hopefully the questioning can be devoted primarily 
to you, Secretary Summers, if it relates to your areas of 
interest, so that we can then have you excused at 12:00.
    And I am sure that Charlie Rangel does want to make an 
opening, welcoming statement.
    Mr. Rangel. Mr. Chairman, I would like to yield my time to 
you for you to continue to laud the Administration as you have 
this morning. Thank you. [Laughter.]
    Chairman Archer. Well, it is actually--
    Mr. Kleczka. Mr. Chairman, reserving the right to object--
    [Laughter.]
    Chairman Archer. It actually is very heartening to the 
Chair that there can be this bipartisan working together. It is 
always a bigger comfort zone to get things done that are in the 
best interests of this country. And so Secretary Summers, if 
you will lead off, we'll be happy to receive your testimony.

    STATEMENT OF HON. LAWRENCE H. SUMMERS, SECRETARY, U.S. 
                   DEPARTMENT OF THE TREASURY

    Secretary Summers. Thank you very much, Mr. Chairman, 
Ranking Member Rangel, members of the Committee. We are all 
glad to be here, and we all have longer statements for the 
record.
    I'm pleased to have a chance to testify on what I believe 
is the most important vote that the Congress will take this 
year, and that is quite likely the vote that the Congress will 
take this year that has the greatest prospect of appearing for 
good or ill in history books written 20 or 50 years from now.
    Let me briefly outline why I believe that the passage of 
PNTR is enormously in our national economic interest and then 
conclude with some comments about the broad context. First, it 
is in our national economic interest because of the commercial 
benefits that it brings.
    As my colleagues will outline, the PNTR agreement brings 
about historic change and openness in China's market. To forego 
that opportunity would be to inappropriately disadvantage 
American producers. To forgo that opportunity at a time when 
that opportunity may become open to all our major international 
competitors would particularly be folly. At a time when it is a 
matter of great economic importance that we promote our 
exports, this type of market opening agreement is very much in 
the national interest.
    And unlike many of the trade agreements and trade issues 
that we discuss, this agreement is a one way street, providing 
for new opening of a foreign market to American products but 
not providing for any further opening of the American market to 
foreign products.
    The second economic argument is that passage of PNTR this 
supports the cause of market reform within China and creates a 
rule-based economic framework within which future Chinese 
reforms to take place. We've spoken with Chinese officials. 
They've made it clear that they see an important benefit of 
this agreement as being the framework that provides for the 
transformation of their society.
    Last year, the number of Chinese internet users quadrupled 
from 2 million to 9 million. This year, it should more than 
double to 20 million. As the President has said, consider how 
much the internet has changed America, which is already an open 
society, and then imagine how much it can change China.
    By providing a framework for reform, by strengthening the 
hand of those who are more committed to the market and to 
openness, China's WTO Accession serves our interest in 
influencing China's evolution.
    Let me say finally, Mr. Chairman, that as important as PNTR 
is, we recognize that it is but one piece of a much larger 
global challenge. And that challenge is, as the President has 
said, to make this global economy work, it has to work for 
people, and it has to support our core values. This imperative 
needs to continue to shape our overall international economic 
policy and our overall policy towards China.
    In this context, I want to highlight that the 
Administration believes that the proposals being developed by 
Congressman Levin, with others, are constructive and address 
issues of major importance. We very much welcome and support 
further dialogue on these proposals among Members on both sides 
of the aisle.
    For example, we agree that it is a priority for the United 
States to press for improvement in China's human rights, 
religious freedom, labor rights and the rule of law. Finding 
alternatives to the annual NTR renewal process, such as a 
commission, modeled in some ways on the Helsinki Commission, to 
keep a spotlight on these issues, makes good policy sense.
    We agree, as well, that it is essential to have a vigorous 
program, both within our Government and within the WTO, to 
monitor China's implementation of its WTO commitments and to 
ensure that China lives up to them. This monitoring requires 
adequate resources.
    Finally, we agree that we must make clear the rules and 
procedures this and future Administrations will employ to 
implement the strong import-safeguard protections that Charlene 
Barshefsky so ably negotiated. We could not, of course, accept 
anything that would in any way condition PNTR. However, Mr. 
Chairman, Members of the Committee, we are committed to working 
with Congress to address these concerns and are receptive to 
any and all ideas that make good policy sense and can garner 
broad bipartisan support.
    Thank you.
    [The prepared statement follows:]

STATEMENT OF THE HON. LAWRENCE H. SUMMERS, SECRETARY, U.S. DEPARTMENT 
OF THE TREASURY

    Chairman Archer, Ranking Member Rangel, and Members of the 
Committee, I thank you for the opportunity to testify today on 
what I believe to be the most important issue that Congress 
will face this year: the decision to grant China permanent 
Normal Trade Relations, or PNTR.
    Last fall, the United States signed a bilateral agreement 
with China to bring it into the World Trade Organization, on 
strong terms that will open its markets to American exports. 
After China completes its agreements with other countries, and 
completes the multilateral part of the negotiation, it will 
join the WTO. But for us to enjoy the full benefits of the 
market opening that we negotiated, we must first grant China 
the same permanent normal trading status that we have already 
granted to every other country with which we share the benefits 
of the WTO.
    The legislation presently before Congress enables the 
United States to grant PNTR to China once it has completed its 
accession, provided that it is on terms at least as good as 
those in our 1999 bilateral agreement. In fact, the terms can 
only get better, as we benefit from all further concessions 
China makes to other countries.
    I will discuss in a few moments the concrete commercial 
advantages for the United States of passing this bill. I 
believe they are enormous. Moreover, the agreement with China 
is a one-way street. China opens its markets to an 
unprecedented degree, while in return the United States simply 
maintains its current market access policies.
    It is also important to keep in mind what granting PNTR to 
China is not:
     This vote is not about whether China will enter 
the WTO: it will become a member either way.
     It is not about whether Chinese producers will 
have access to our market: they will continue to be able to 
sell their goods in the United States whether or not Congress 
passes PNTR.
     It is not about whether we approve or disapprove 
of China's human rights record: we will continue to pursue 
improvements at the United Nations Human Rights Commission and 
other fora, either way.
     It is not about China's policies toward the 
environment: we will continue to work with China to improve its 
capacity to protect China's environment and national resources, 
either way.
     It is not about China's policies toward Taiwan or 
other strategic issues that concern us: we will continue to 
press for peaceful resolution of differences between the PRC 
and Taiwan, and to urge China to respect global norms of 
conduct in nuclear nonproliferation and other areas, either 
way.
    It is difficult to discern any disadvantage to the United 
States in passing this legislation. We will continue to press 
our full agenda with China regardless of how Congress votes. 
And China will open its markets to other members of the WTO 
when it joins the system, regardless of how Congress votes.
    There are, however, three crucial advantages to the United 
States in passing this bill, which I would like to focus on 
today:
     First, there are the direct and commercial 
benefits of the market opening agreement that we concluded last 
fall.
     Second, there are the economic and broader 
benefits to the United States of promoting economic and social 
change in China.
     Third, there is the ultimate enhancement of 
America's national security interests that comes from 
integrating China more closely with the community of nations.

I. The Commercial Benefits to the United States of Granting 
PNTR

    First, the economic and commercial benefits of granting 
PNTR are significant and all on the side of US businesses and 
workers. By passing PNTR, we will be agreeing to continue to 
grant China the same access to our markets that its producers 
currently enjoy. What we will get in return--as a result of the 
agreement we concluded last fall--is unprecedented new access 
to what could ultimately become the largest market in the 
world.
    I might note that it is evidence of the compelling nature 
of these benefits that economists reflecting the full diversity 
of academic opinion have been united in their support for the 
Administration's approach. On April 25, 138 economists, 
including 13 Nobel Laureates, released a joint letter to the 
American people strongly supporting China's accession to the 
WTO on the terms that we negotiated last fall. It has sometimes 
been remarked that asking five economists a question will 
generate ten different answers. On this issue there has been 
only one answer: that welcoming China into the global economic 
system is right for the American economy and for the global 
economy.
    The scope of this new access is impressive, with reductions 
in tariff and non-tariff barriers on industrial and 
agricultural goods and the elimination or reduction of barriers 
to American service providers:
     Chinese tariffs on industrial and agricultural 
goods will fall by 50 percent or more in the space of five 
years, along with sharp cuts in non-tariff barriers to U.S. 
exports. For example:
    --Industrial tariffs on U.S. products will fall from an 
average of approximately 25 percent in 1997 to 9.4 percent in 
2005.
    --In the automobile sector, tariffs will fall from 80-100 
percent to 25 percent by mid-2006, with the largest cuts in the 
first years after WTO accession. Quotas on autos will be phased 
out. And American auto companies will be allowed to provide 
auto financing for the first time.
    --Tariffs on the broad range of agricultural goods will 
fall by roughly one half, with larger cuts for US priority 
goods. The role of state trading companies will be 
progressively reduced, allowing for more market-based trade. 
This improved access is expected to result in an increase of $2 
billion a year in our agricultural exports to China by 2005, 
according to USDA estimates. In addition, China has committed 
to eliminate agricultural export subsidies, which displace 
American exports to third country markets, and to reduce 
domestic agricultural subsidies, which also distort trade.
    --China will participate fully in the Information 
Technology Agreement (ITA), eliminating all tariffs by 2005 on 
computers, semi-conductors and other high-tech products--
markets in which the U.S. is highly competitive.
    --China will also eliminate or sharply reduce a wide range 
of crucial non-tariff barriers. For example, American exporters 
will be able to import directly into China themselves, 
distribute within China, and offer after-sale service in ways 
they never could before. With these rights, U.S. firms and 
farmers will be better able to sell American-made products 
directly to Chinese consumers.
     China would phase out restrictions in a broad 
range of services, including in financial services and other 
key sectors where the United States is more competitive.
    --China has agreed to liberalize international trading 
rights, and wholesale and retail distribution services 
throughout China in three years for most products. Instead of 
having to produce in China or import and sell through a state-
sponsored middleman, American businesses will win the right to 
distribute goods directly--goods that are made here at home.
    --In banking, China has accepted full market access for 
branches and subsidiaries of foreign institutions, to be phased 
in progressively over five years.
    --In insurance, the Chinese market will also be 
progressively opened over five years, with the elimination of 
limits on the number of licenses for foreign firms and the 
geographic scope of operations for foreign firms. In non-life 
insurance, wholly foreign owned subsidiaries would be allowed 
two years after accession.
    --In telecommunications, China has agreed to allow direct 
foreign investment for the first time. It will also participate 
in the Basic Telecommunications Agreement, accepting pro-
competition principles such as an independent regulatory 
authority and interconnection rights.
    --The Chinese market for a wide range of computer, internet 
and software services will be opened to American companies, 
either through joint ventures or direct service. The opening of 
the information technology and telecommunications sectors comes 
at the same time as the powerful revolution in information and 
communications technology is just beginning in China. American 
high technology exports to China grew 500 percent between 1990 
and 1998 alone.
    In addition to this new access to China's markets, we will 
benefit from unprecedented special safeguards and protections 
to defend American workers and farmers from import surges, 
unfair pricing, and abusive investment practices. No agreement 
on WTO accession has ever contained stronger measures.

Notably:

     A``China-specific'' safeguard that allows us to 
take measures focused directly on China in case of an import 
surge that threatens a particular industry. This protection, 
which remains in effect for 12 years after accession, provides 
stronger and more targeted relief than our current Section 201 
law.
     Strong anti-dumping protections. The agreement 
includes a provision recognizing that the U.S. may employ 
special methods, designed for non-market economies, to 
counteract dumping by Chinese exporters for 15 years after its 
accession.
     Requirements that China eliminate barriers to U.S. 
companies that cost American jobs. For the first time, 
Americans will have the means, accepted under the WTO rules, to 
combat such measures as forced technology transfer, mandated 
offsets, local content requirements and other practices 
intended to drain jobs and technology away from the U.S. 
Moreover, combined with Chinese commitments to open up trading 
and distribution rights, these protections will allow American 
companies to export products made at home by American workers 
to China, rather than being forced to set up factories in China 
or go through Chinese government-approved middlemen in order to 
sell products there.
    We are already preparing for the most intensive enforcement 
and compliance effort ever mounted for a single trade 
agreement. The President has requested an additional $22 
million for new enforcement and compliance efforts, which will 
focus in large part on China. The Administration's aggressive 
monitoring and enforcement efforts will include the private 
sector, other WTO partners, and Congress. For the first time, 
China's compliance will be subject to multilateral enforcement 
under the WTO dispute settlement mechanism, which will force 
China to comply with WTO rulings or be subject to trade 
sanctions.

II. America's Stake in Promoting Successful Market Reform in 
China

    There are also crucial indirect advantages for the United 
States in China's WTO membership in that it will both support 
the cause of market reform within China -and provide an 
effective rule-based framework for future Chinese reforms to 
take place.
    China has come a long way since the beginnings of market 
reforms a little over 20 years ago. Its economy has grown by 
more than 350 percent in real terms. It has risen to being the 
10th largest trading nation. And the number of Chinese with 
access to a television has risen one hundred-fold, to one 
billion.
    This transformation has brought enormous benefits for the 
Chinese people. But it has also unleashed new forces for change 
in the Chinese economy and society more broadly, forces that 
the authorities fear they will ultimately be unable to control. 
As a result, there are powerful voices within China today in 
favor of halting, or even reversing, the process of economic 
reforms -and all that reform implies.

By supporting China's decision to sign this agreement and enter 
the WTO:

     We can strengthen the hand of those who favor the 
reform path, and make it more difficult for China to turn back 
the clock.
     We can also support the establishment of a rules-
based framework for continued economic reform in China that can 
support faster growth in productivity and wages in China -and 
thus higher demand for our products in the future -and provide 
a catalyst for broader changes that will help to promote core 
American interests and values. As competition and integration 
proceed, China will need to become more market-based; more 
protective of personal and commercial freedoms, and more open 
to the free flow of information and ideas.
    The potential economic and broader benefits of supporting 
the forces of Chinese reform are evident when we consider the 
impact on China's growing technology sector. By the end of this 
year, some analysts predict that China will become the world's 
second largest market in both telecommunications and personal 
computers. Last year the number of Chinese Internet users 
quadrupled, from 2 million to 9 million. And this year, it 
should more than double, to 20 million.
    No amount of censorship or monitoring can completely 
control this explosion of information. WTO membership will not 
only open Chinese markets, but will also provide China's people 
with an unprecedented opening to the outside world. As the 
President has said: consider how much the Internet has changed 
America, which is already an open society, then imagine how 
much it could change China.
    Already, in the wake of the agreement last fall, there are 
clear signs of renewed commitment to reform at the highest 
levels of the Chinese leadership, a commitment that is 
expressly linked to the need to prepare the economy for tougher 
competition from the outside world.
     The government has stepped up efforts to promote 
the development of private firms, the most dynamic sector of 
China's economy, by eliminating heavy deposit requirements and 
other regulations which discriminate against them and allowing 
them to list themselves on the stock market for the first time.
     People's Bank of China Governor Dai has pledged to 
intensify efforts to clean up bad loans within the banking 
sector and to enhance competition among banks by permitting 
more flexible interest rates. A regulatory overhaul is underway 
to level the playing field between foreign and domestic firms 
in line with WTO commitments.
     As the Wall Street Journal reported, even parts of 
the economy that the Chinese consider strategically important 
are being opened up to the private sector, with individual 
investors already dominating the Chinese Internet industry and 
being allowed take ownership stakes in domestic banks for the 
first time.
    We recognize that the kind of changes that we seek to 
support in China will not happen overnight. In the meantime, 
the United States will remain continuously vigilant on human 
rights abuses in China, and we will continue to express 
forcefully our disapproval when such abuses occur. The 
Administration already engages the Chinese on this issue 
through bilateral channels, monitors the situation continuously 
and issues annual reports.
    We are, however, convinced that we will have much more 
positive influence over China's behavior if we are actively 
engaged with China, rather than trying to isolate it. And I 
might note that a large number of prominent activists in this 
area have the same view. For example:
     Martin Lee, the leader of the Democracy Party of 
Hong Kong, has said: ``the participation of China in the WTO 
would not only have economic and political benefits, but would 
also serve to bolster those who understand that the country 
must embrace the rule of law.''
     Dai Qing, a Chinese environmentalist and former 
prisoner in China, wrote recently that she believed that: 
``permanent normal trade status, with its implications of 
openness and fairness, is among the most powerful means of 
promoting freedom in China.''
     A Chinese dissident, Ren Wanding, a leader of the 
1978 Democracy Wall Movement, sees Chinese entry into the WTO 
as 'a new beginning.'''

III. The Broader National Interest In Supporting Greater 
Integration of China

    Finally, a policy of welcoming China into the community of 
nations--rather than being a voice that keeps China out, even 
when it commits to live by the rules--is a policy that supports 
our deepest national security interests and values.
    Ever since the rise of Assyria and Sparta, emerging 
economic strength and major changes in the economic balance of 
power have raised the specter of war and conquest. In this 
century alone we have seen two World Wars that followed closely 
on the emergence of major new economic powers. And the pace of 
economic change in China over the past 20 years -and indeed 
through much of Asia--is literally unprecedented in history, 
with standards of living for hundreds of millions of people 
quadrupling or more in a single generation.
    This has so far been achieved with the minimum of conflict, 
despite the pervasive rivalries between the peoples of Asian 
nations, is a reflection of the progress that has been made 
across the region toward openness and integration. And it 
speaks to the success of postwar international institutions in 
helping to cement that progress. But if the next quarter 
century in Asia is to be as successful as the last, it will be 
crucial that China use its emerging power in a constructive 
way, that it fits into the global economic system, and that it 
continues to maintain economic growth and stability.
    As President Clinton has said, if we have learned anything 
in the last few years, it is that rapidly changing, insecure 
nations can pose as a great a challenge to the United States as 
strong and confident ones. Our long-term strategy must be to 
encourage the right kind of success in China: to help it grow 
into a strong, prosperous and open society; to come together 
not fall apart; and to become part of institutions that promote 
our deepest values and interests and can build mutual trust. 
And we have a much greater chance of having a positive 
influence if we welcome it into the broader global system.
    By learning to ``play by the rules,'' both internationally 
and domestically, China will strengthen the rule of law, which 
will enable it to become a more reliable partner and a fairer 
society. It can even lay the groundwork for protection of core 
values in China, such as human rights, religious freedom, 
workers' rights and environmental protection.
    We believe that in a 21st century global economy, China 
will increasingly have to recognize that, to maintain stability 
and growth at home, it must meet, rather than stifle, the 
growing demands of its people for openness and accountability. 
We must not seek to cut China off from the economic and broader 
forces that are most likely to change it in the right 
direction.
    This is not a policy based on mutual affection. As I said 
at the beginning, we can and will continue to express our 
differences with China both forthrightly and consistently. 
Simply bringing China into the WTO does not guarantee that its 
government will take a responsible, constructive course. But it 
will lead the authorities to confront that choice sooner, and 
it will make stronger and more visible the imperative to make 
the right choice.

IV. Concluding Remarks

    Mr. Chairman, I have emphasized today three key reasons: 
the commercial benefits to the US of this agreement; America's 
deep economic and broader interest in China's continuing 
evolution; and our deep national interest in a more stable and 
peaceful global system. This is why we believe granting China 
PNTR to be enormously in America's core interests.
    As important as PNTR is, we recognize that it is but one 
piece in a much larger mosaic as we consider the kind of China 
we would like to see -and the kind of global economic system 
that we want to create. The President has called it ``the 
challenge of the millennial generation...to create a world 
trading system, attuned both to the pace and scope of a new 
global economy and to the enduring values which give direction 
and meaning to our lives.'' If we want this new global economy 
to work, we have to make sure it works for people. And we have 
to make sure it works to support our deep values.
    This imperative will continue to guide our international 
economic policy more broadly--in areas ranging from our support 
for international efforts to address environmental problems, to 
support for core labor standards. And it can and must continue 
to guide our broader policy toward China in the months and 
years ahead.
    In this context, let me say that the Administration 
believes that the proposals being developed by Congressman 
Levin with others are constructive, address issues of major 
importance, and we welcome further dialogue on these proposals 
among Members on both sides of the aisle.

For example:

     We agree that it is a priority for the United 
States to press for improvement of China's human rights, 
religious freedoms, labor rights and the rule of law. Finding 
alternatives to the annual NTR renewal process, such as a 
Commission, to keep a spotlight on these issues makes sense.
     We agree as well that it is important to have a 
vigorous program, both within the USG and within the WTO, to 
monitor China's implementation of its WTO commitments and to 
ensure China lives up to them. And we must have adequate 
resources to accomplish this.
     Finally, we agree that we must make clear the 
rules and procedures this and future Administrations will 
employ to implement the strong import safeguard protections we 
negotiated.
    The Administration could not, of course, accept anything 
that would in any way condition PNTR. However, we are committed 
to working with Congress to address these concerns, and are 
receptive to ideas that make good substantive sense and can 
garner broad bipartisan support.
    Mr. Chairman, granting PNTR to China represents but one of 
the aspect of the relationship with China that we will be 
pursuing in the years ahead -and one piece of the global 
economic system we would like to build. It will, however, be an 
exceptionally important piece--one that is fundamentally 
supportive of our broader long-term economic and broader 
national interests.
    Indeed, with due respect to all the other issues we work 
on, I believe this is the only vote that Congress will take 
this year that is likely to appear in a prominent way in 
history books 25 or 50 years from now. I look forward to 
working with this Committee and the House as we work toward the 
best result on this crucial issue. Thank you.
      

                                


    Chairman Archer. Thank you, Secretary Summers.
    Our next witness is Secretary Dan Glickman. We're happy to 
have you, one of our former colleagues who has gone on to 
bigger and better things, we're happy to have you before the 
Ways and Means Committee.
    Welcome, and you may proceed.

 STATEMENT OF HON. DAN GLICKMAN, SECRETARY, U.S. DEPARTMENT OF 
                          AGRICULTURE

    Secretary Glickman. Thank you, Mr. Chairman, Mr. Rangel, 
Mr. Crane. It's an honor for me to be here.
    I'm going to try to be brief. I have a formal statement 
which talks about the extraordinary benefits to American 
agriculture, perhaps the most export sensitive part of the 
American economy in the size and scope of the benefits of 
agriculture to this PNTR vote.
    But I'd like to just briefly talk, as you know, the 
President sent a mission to China last week, which he asked me 
to lead. Four of your colleagues went with me, Congressman 
Walden of Oregon, Congressman Dicks of Washington, Congressman 
Meeks of New York, Congressman Hinojosa of Texas, and Governor 
Shaffer of North Dakota. It was a bipartisan meeting.
    And what I wanted to do is give you the texture of three or 
four things that we did. Some involved agriculture and some 
didn't. One was a discussion with several dozen Chinese 
workers, all the way from Armstrong Tile to Aetna to Motorola 
to high tech, low tech, medium tech, talking about their 
opportunities working for American companies, their wages, 
their benefits, their access to the internet as a result of 
their working for American companies, and the impact of their 
employment on co-workers working in non-American companies, 
other Chinese companies, that was absolutely dramatic.
    I mean, I would have never dreamed that we would see 
Chinese workers working for American companies with a lot of 
the same benefits that American workers have, and with the 
opportunity to dramatically further expand in the rest of the 
world. Talk about a way to impress American values into China. 
These people were very, very impressed and involved and imbued 
with a lot of the work ethic and values that our workers have. 
And they will spread throughout the country. That was a 
dramatic thing that we did.
    We went to a soybean crushing facility. China, if their 
incomes continue to improve, their eating patterns will 
dramatically change. They will upgrade. They will eat a lot 
more meat, they will use a lot more cooking oils that we use, 
they will eat a lot more citrus. And we saw the potential for 
just a dramatic increase in value added and bulk commodity 
agricultural exports.
    We toured a major supermarket, kind of like a hyper mart, a 
Wal-Mart. There we saw California grapes, pistachios, oranges 
of high quality that were extremely popular, that had just come 
in, I believe, from both California and Florida. Washington 
apples, Alaskan seafood, frozen vegetables, U.S. hazelnuts, 
Oregon hazelnuts and the like. And the fact is that the quality 
was outstanding.
    And it's also again an example of American values coming in 
with those agricultural products. The Chinese people really 
like what we are selling them. And as long as we keep the 
quality up, there will be a dramatic potential market there.
    And the final thing I thought I would just discuss with you 
is our meeting with Bishop Chen in Shanghai. And I know 
Congressman Wolf talked about human rights issues. But Bishop 
Chen is the Catholic bishop of Shanghai. He was in jail for 27 
years, from 1955 or 1956, 1954, until 1982 when he was 
released. He was jailed for allegedly being a spy for the 
Vatican.
    And in fact, he told us that he was probably saved during 
the cultural revolution because he was in jail. They didn't 
bother with him, since he was already incarcerated.
    Some of you may have been to the cathedral there in 
Shanghai. They give mass to about 5,000 people every Sunday. 
And his views were that while human and religious rights had 
not reached the levels that he'd like them, that if in fact we 
turn this deal down, it would have a dramatic negative impact 
on human and religious rights in China, not a positive impact. 
It would have a negative impact.
    And it was a profound experience, and I realize that you 
can't necessarily extrapolate his views to every human rights 
issue and religious rights issue in China, but that was an 
extremely significant thing.
    The other side is, we went to the Shanghai stock exchange 
right before then. I don't know if any of you have been there. 
About 500 companies are traded in this modern stock exchange, 
which is computerized. On the wall in the back was a modern 
Reuters communication system on which was listed on the board 
every major stock exchange in the world and what was happening 
at that moment in time, with Chinese workers managing that 
effort.
    It turned out that the CEO of that stock exchange happened 
to spend time at the University of Kansas. So it was of 
personal interest to me to see that there.
    But the whole trip, and you ought to talk to Congressman 
Meeks and Hinojosa and Dicks and Walden to get their 
experiences. I know all of you have been to China, but the 
whole trip convinced me that while there is no miracle in terms 
of the future of U.S. agricultural trade or trade generally, 
that this country has a lot more to be gained by going ahead 
with this agreement than by rejecting it.
    Thank you.
    [The prepared statement follows:]

STATEMENT OF THE HON. DAN GLICKMAN, SECRETARY, U.S. DEPARTMENT OF 
AGRICULTURE

    Mr. Chairman, members of the Committee, it is a pleasure to 
appear before you to discuss permanent Normal Trade Relations 
(PNTR) for China.
    Congressional approval of permanent Normal Trade 
Relationship (PNTR) status for China is the Administration's 
top priority this year. PNTR status is necessary to ensure that 
U.S. agriculture has access to a market that accounts for one-
fifth of the world's population.
    America's farmers have a major stake in the debate over 
PNTR status for China. The granting of PNTR status, together 
with China's accession to the World Trade Organization (WTO), 
will provide economic benefits. That is indisputable. We have 
everything to gain and a great deal to lose by refusing to 
grant PNTR status to China.
    We estimate that the U.S.--China WTO accession agreement 
could add an estimated $1.6 billion annually to U.S. 
agricultural exports of bulk commodities such as grains, 
oilseeds and products, and cotton by 2005. U.S. export gains 
could approach $2 billion as the Chinese reduce their tariffs 
on high value-added products, such as poultry, pork, beef, 
citrus and other fruits, vegetables, tree nuts, and forest and 
fish products.
    China has committed to eliminate export subsidies, cap and 
reduce domestic support measures, eliminate scientifically 
unjustified sanitary and phytosanitary barriers, provide strong 
provisions against unfair trade and import surges, and adhere 
to the rule of international law (i.e., the dispute settlement 
system of the WTO, which, overall, has benefitted the United 
States).
    Tariffs on our priority products like meat and dairy will 
drop, on average, from 31 to 14 percent, by 2004.
    Tariff-rate quotas (TRQs) and other elements of the U.S.--
China agreement should provide U.S. agriculture with the 
opportunity to capture a considerable share of the Chinese 
market. American farmers and ranchers, with their superior 
products and competitive prices, will benefit even more from 
the TRQs if China develops into a market-based economy as we 
hope.
    I know many people are concerned about China's overwhelming 
overall trade advantage with the United States, which reached 
nearly $69 billion last year--second only to our trade deficit 
with Japan at $73.9 billion. That's because current Chinese 
policies shield its economy from world market forces and 
restrain competition. This agreement will go a long way toward 
correcting that imbalance. It provides a comprehensive approach 
to dealing with China's trade policies that put U.S. exports at 
such a disadvantage.
    The agreement also specifically addresses the issue of 
protecting U.S. agricultural and non-agricultural products from 
import surges from China. This is a facet of the agreement that 
I believe is a very important point. The product-specific 
safeguard provision sets up a special mechanism to address 
increased imports that cause or threaten to cause market 
disruption to a U.S. industry.
    This mechanism, which is in addition to other WTO safeguard 
provisions, differs from traditional safeguard measures. It 
permits the United States to address imports solely from China, 
rather than from the whole world, that are a significant cause 
of material injury and to adopt measures such as import 
restrictions to deal with those import issues. In addition, the 
United States will be able to apply restraints unilaterally 
based on legal standards that differ from those in the WTO 
safeguards agreement. This could permit action in more cases. 
The product-specific safeguard will remain in force for 12 
years after China joins the WTO.
    I think President Clinton summed it up best when he said in 
both his State of the Union address and when he introduced his 
proposed legislation at the John Hopkins School for Advanced 
International Studies, ``Our markets are already open to China; 
this agreement will open China's markets to us.''
    PNTR for China is not just a vote on our China trade 
policy. By and large, our trade laws should be used as 
intended--to challenge and roll back trade barriers in China 
and elsewhere. It also ensures the U.S. engagement in a wide 
range of economic and social issues in China such as promoting 
human rights, freedom of religion, and the democratization 
process.
    We can best reconcile those differences and influence their 
behavior by engaging them, by bringing them into a rules-based 
global community, not by isolating them. In addition, removing 
these barriers allows China to have access to quality U.S. 
products such as better quality cotton or soybeans with higher 
content oil. China wants the quality of U.S. products and the 
reliability of supply. For all these reasons, that is why 
approving PNTR status for China is so important for our 
national interests, and especially for American farmers. This 
is a historic opportunity because what it can achieve in 
opening Chinese society goes far beyond the economic 
underpinnings of improved trade with China. In granting PNTR 
status, we are not abandoning the principles we as a nation 
have always valued; instead, we provide tangible economic 
benefits to the American people.
    I believe that China's WTO accession agreement with the 
United States is a bold statement that China intends to be a 
responsible player on the world stage. The Chinese have shown 
they understand that they must commit to longstanding 
principles governing world trade--transparency, fair trade 
practices, peaceful settlement of disputes and, most 
importantly, the rule of law.
    The agreement is strong evidence of China's willingness to 
move beyond the stagnant, protectionist policies of the past 
and embrace economic and trade principles that will have a 
ripple effect on their economic, social and political 
institutions.
    In fact, changes in Chinese agricultural policies are a 
good indication that China is beginning to see the advantages 
of stronger ties to the global economy. Over the past 50 years, 
China has struggled to increase its grain production to meet 
the needs of its growing population. But now China's leaders 
are pointing out that China might be able to raise farm incomes 
by diverting resources away from areas where it does not have a 
comparative advantage--like grain production -and into areas 
that would take advantage of the large Chinese labor pool--like 
horticultural products.
    Chinese policy makers are now saying that China could live 
with a self--sufficiency rate of 95 percent rather than 100 
percent. That 5 percent may not sound like much, but if China 
imported just 5 percent of its grain needs, that would equal 20 
million tons of grain a year--making China the world's second 
largest market for imported grain after Japan.
    I would like to leave you with one final thought. China can 
still accede to the WTO without Congressional approval of 
permanent NTR status (accession is independent of the U.S. 
process and is reached by consensus of the 136 WTO members). If 
Congress were not to approve permanent NTR status for China, 
then the only winners would be our competitors such as the 
European Union and Australia. They are aggressively pursuing 
new trade deals and would welcome the chance to pick up 
business that would otherwise go to U.S. farmers and ranchers. 
Rest assured, once our competitors are in those markets, they 
will be very difficult to displace--and the United States is 
not likely to regain substantial market share for a long time.
    Mr. Chairman, that completes my statement. I would be happy 
to answer any questions.
    [Attachments are being retained in the committee files.]
      

                                


    Chairman Archer. Thank you, Secretary Glickman.
    Our next witness is a gentleman that I've enjoyed working 
with very closely on this issue over the last months, Secretary 
of Commerce William Daley. We're happy to have you before our 
Committee, and we'll be pleased to receive your testimony.

STATEMENT OF HON. WILLIAM M. DALEY, SECRETARY, U.S. DEPARTMENT 
                          OF COMMERCE

    Secretary Daley. Thank you very much, Mr. Chairman and 
Congressman Rangel, and members of the Committee. It is a 
pleasure to join my colleagues and come once again before the 
Ways and Means Committee.
    We have spent a tremendous amount of time over the last 
number of months on the Hill talking to members. And many are 
convinced of the economic positive results of this deal with 
China.
    But a question which we have all heard over and over again 
is how do we know that China will comply with this agreement? 
Their track record frankly has been mixed.
    However, in my opinion, things are changing dramatically. 
The Chinese have told all of us countless times that they want 
the benefits of open markets. And after 14 years of 
negotiations, they do want to join the WTO and follow the 
rules. Obviously, deeds, not words, matter to all of us. China 
is in the process of changing its rules and laws, and 
retraining state bureaucrats and managers, and all of this is 
very positive.
    But there are no guarantees. So today I'm announcing a five 
point Commerce Department plan that will be very aggressive at 
making sure China lives up to this deal. It takes effect 
immediately and will not require additional resources to start. 
And it dovetails with the very helpful enforcement proposals 
which Congressman Levin has put forward and other members are 
working with.
    First, we're putting in place a new rapid response team on 
China. It includes a dozen compliance and trade specialists. It 
will be headed by a deputy assistant secretary for China who is 
focused on compliance. This will be the highest level Commerce 
official ever put in charge of enforcing a trade agreement with 
a single country.
    Next week, I'm sending a senior Commerce official to 
Beijing to determine the needs and priorities of the U.S. 
business community and report back immediately. By next year, I 
want to triple resources for compliance, increase the size of 
our team and permanently station compliance experts in China. I 
want to do the same in Japan and South Korea as part of a 
broader effort to beef up enforcement worldwide.
    Obviously, we need Congress' help. The President has 
requested $22 million for these measures in his budget for next 
year.
    The second point of our plan explains where the name rapid 
response team comes from. We're putting in place tight 
deadlines for investigating market access and commercial 
problems. Our goal is to resolve conflicts quickly before they 
turn into formal trade disputes, and to cut through 
bureaucratic red tape. But as Ambassador Barshefsky will tell 
you, we will not hesitate for a minute to go to the WTO if 
that's what it takes to fix a problem.
    Third, we will keep a careful eye on U.S.--China trade 
flows. We will have a special program watching for surges in 
imports, much like our monitoring program for steel imports 
which has been very effective. We'll chart export growth in key 
sectors to ensure China is opening its markets as it has agreed 
to. And we'll have special programs for anti-dumping and anti-
subsidy rule violations.
    Fourth, we want to help China help itself. We will share 
our experiences in putting WTO legislation into effect and give 
technical assistance which China has requested of us. Meetings 
on this began this summer. Last month when I attended the Joint 
Commission on Commerce and Trade in Beijing, we agreed to a 
comparative law dialogue, to help the Chinese conform their 
laws to the WTO.
    Fifth and finally, we must be more proactive on the export 
side. I want American businesses, especially first time 
exporters, to understand U.S. legal rights and China's 
commitments under the WTO. In our country, we're planning to 
hold a number of training sessions for small and medium size 
companies, and will be using our 100 trade centers around our 
country and our 5 offices in China to find export 
opportunities.
    In the past, Commerce has created programs to handle unique 
situations. We did it for Eastern Europe after the fall of the 
Berlin Wall. And it was popular with the business community and 
was very successful.
    Our five point plan is good government, just as businesses 
are hiring and expanding so they are ready one day to export, 
we in Government must also be ready.
    Let me highlight another issue of great concern to us and 
to many of the members before us. And that is, the impact of 
trade on workers and communities. President Clinton is 
requesting a substantial budget increase to help them succeed 
in this global economy. The package includes a community 
economic adjustment initiative, which is modeled on the Defense 
Department's program to help communities slated for military 
base closures. This program, based at Commerce's EDA, would 
coordinate Administration-wide responses for regions suffering 
from sudden and severe economic distress.
    The package would also reform and expand the Labor 
Department's trade adjustment assistance program. And it would 
greatly expand the President's new markets initiative by 
providing investment initiatives to spur economic activity in 
distressed urban and rural areas.
    Mr. Chairman, we need programs like these if we are to 
build confidence amongst the American people about trade and 
about globalization. I did a number of trade education events 
around the country last year. And you can see, people are 
sincerely worried as each of you have heard from your 
constituents, worried about the effects of globalization. We 
saw it in Seattle in December, and we saw it in Washington last 
month.
    Government needs to step up to the plate by helping all 
Americans deal with the effects of globalization, because it is 
here to stay. And as we know, the world economy has been good 
for us as a Nation. We are the biggest trading Nation on earth. 
Our economy is the strongest, and our goal and the reason to 
pass the PNTR is to keep our Nation strong.
    Thank you very much, Mr. Chairman.
    [The prepared statement follows:]

STATEMENT OF THE HON. WILLIAM M. DALEY, SECRETARY, U.S. DEPARTMENT OF 
COMMERCE

    Mr. Chairman, Congressman Rangel, members of the Committee, 
thank you for the opportunity to testify today on the benefits 
to America of China's accession to the World Trade Organization 
(WTO). It is my pleasure to appear here today with my 
colleagues, Treasury Secretary Lawrence Summers, Agriculture 
Secretary Glickman, and United States Trade Representative 
Ambassador Charlene Barshefsky to discuss this important 
initiative. Secretary Summers's testimony discusses the 
economic benefits of this agreement to the United States, and 
Ambassador Barshefsky's testimony places WTO accession and the 
grant of Permanent Normal Trade Relations into the broader 
trade perspective as well as outlining the details of the 
November U.S.--China accession agreement itself. Secretary 
Glickman will discuss the benefits of China's WTO accession for 
American farmers. I will focus in my testimony on our efforts 
to ensure that China provides us the market access that we have 
negotiated.
    I recently returned from a trip to Beijing where I co-
chaired the 13th Session of the U.S.--China Joint Commission on 
Commerce and Trade (JCCT). The JCCT is a government-to-
government forum developed to promote U.S.--China commercial 
cooperation. We met to discuss China's ongoing reform efforts 
and ways to enhance China's transition to a rules-based global 
trading system. Obviously a lot of the discussion centered on 
China's pending application to join the WTO and on our process 
for deciding whether to grant Permanent Normal Trade Relations 
(PNTR).
    This was my third visit to China during my tenure as 
Secretary of Commerce. Much has changed even in the few years 
that I have been traveling there. The signs of a nascent 
transition to a market-based economy are evident everywhere in 
increased private ownership of businesses, and more freedom for 
the Chinese to choose their own places of employment. Over 
twenty years of domestic reforms have enabled China to lift 
more than 200 million people out of absolute poverty. Wireless 
communications has put cell phones in the hands of 40 million 
Chinese (only a fraction of the potential market) and given 
them access to a world of ideas and influences.
    But many problems exist. High unemployment, inefficient 
state-run enterprises and corruption continue to plague the 
Chinese economy. As a result, economic growth has slowed.
    The Chinese leadership has recognized the need to open its 
market to global competition in order to be able to build a 
modern, successful economy. One of the best indicators of the 
commitment of the Chinese leadership to a more open economy is 
its desire to take on the challenges and obligations of WTO 
membership. I am here today to discuss with you how supporting 
PNTR status for China can move China toward a more open 
economy.
    Last November, after 13 years of negotiations, the United 
States and China reached a bilateral agreement on the terms and 
conditions of China's entry into the WTO. China made 
significant and far-reaching market access and trade 
concessions that will benefit American exporters and import 
sensitive industries across a broad range of industrial goods, 
services and agriculture. It contains strong enforcement 
mechanisms and strong protections against unfair trade. 
American exporters stand to benefit immediately upon China's 
accession to the WTO. China has agreed to begin opening its 
markets in virtually every sector immediately upon accession. 
The phase-in of further concessions will be limited to five 
years in almost all cases, and in many cases only one to three 
years.
    In contrast to China's historic set of commitments, with 
this agreement we have only one obligation, and that is to 
maintain the market access policies we already apply to China 
by granting it Permanent Normal Trade Relations status. We are 
appearing here today to seek your support for the President's 
legislative proposal to grant China PNTR.
    I won't spend my time in this testimony discussing the 
details of this historic agreement. However, attached to my 
testimony is a written summary of the terms of the agreement. 
Also, over 45 industry specific fact sheets, 50 state-specific 
reports, and other detailed information are available on our 
Web site at www.chinapntr.gov.
    There is no doubt that this agreement is a great 
opportunity for American businesses, workers and farmers. It 
will provide unprecedented access to a largely untapped market 
of over one billion consumers. The benefits for the U.S. are 
widespread, including significant opportunities for small and 
medium size businesses. SMEs are responsible for a growing 
share of U.S. exports to China.
    Recently 47 Governors sent a letter to Senators and Members 
of the House expressing how important they believe passage of 
China PNTR is to maintaining the economic growth and prosperity 
of families in their states and territories. These Governors 
know this is a good economic deal for America. They do not want 
America to be left behind.
    Yet this agreement goes beyond economics. As President 
Clinton has said, this represents the most significant 
opportunity that the United States has had to create positive 
change in China since President Nixon's visit there in the 
early 1970s. As a world leader we have an obligation to foster 
further reform in China. Encouraging China to join the rules-
based world trading system gives it a greater stake in the 
stability and prosperity of its regional neighbors and the rest 
of the world. It will create a better, more stable, safer 
world.

Safeguards, Compliance and Enforcement

    In addition to unprecedented access to the vast Chinese 
market, we negotiated additional terms to ensure that we gain 
the full benefits of our agreement and that China lives up to 
its commitments. China has agreed to a number of provisions 
that go to the core of the closed Chinese economy and that will 
result in real and effective market access. These special 
provisions address issues raised by the high degree of 
government involvement in the Chinese economy and by industrial 
policy measures, such as local content, offsets, export 
performance, and forced technology transfer requirements. These 
provisions were sought to address the legitimate concerns 
raised by industries and Members of Congress, Democratic and 
Republican alike.
    The agreed provisions include special protections to guard 
against import surges from China. China has agreed to a 12-year 
product-specific safeguard provision which ensures that the 
United States can take effective action in case of increased 
exports from China which cause market disruption in the United 
States. This applies to all industries, permits us to act on a 
lower showing of injury to domestic industry than under 
existing safeguard law and allows us to act specifically 
against imports from China. This safeguard provision is in 
addition to existing safeguard actions authorized under Section 
201.
    We have also ensured that American firms and workers will 
have strong protection against unfair trade practices, 
including dumping. China has agreed to guarantee our right to 
continue using our current methodology (treating China as a 
non-market economy) in antidumping cases for fifteen years 
after China's accession to the WTO.
    We also have retained the right to use the full range of 
existing United States trade laws, including Special 301 
(intellectual property rights protection), Section 301 (unfair 
trade practices), and, of course, our antidumping laws. It also 
is important to emphasize that nothing in this agreement 
undermines our ability to continue to block imports of goods 
made with prison labor, to maintain our export control 
policies, or to withdraw trade benefits, including NTR itself, 
in case of a national security emergency.
    The agreement will also require China to reform a number of 
internal policies which force foreign companies to locate 
operations in China and give up valuable intellectual property 
rights as conditions of doing business. The agreement will 
eliminate unfair practices such as mandated offsets, local 
content and various investment performance requirements. China 
will take on the obligations of the WTO Agreement on Trade-
Related Investment Measures. This will make it easier for U.S. 
companies to export to China from home rather than forcing 
companies to set up in China in order to sell their products 
there. Forced technology transfers will also be eliminated as a 
condition of investment, better enabling U.S. companies to 
protect their investment in R&D. China has agreed to stop 
enforcement of such practices in existing contracts immediately 
upon accession.
    The agreement contains additional effective enforcement 
tools to ensure China meets its obligations. For the first 
time, China's trade commitments will be enforceable through 
binding WTO dispute settlement, subjecting its actions to 
impartial review, and ultimately sanctions if necessary. The 
multilateral nature of the WTO also strengthens our enforcement 
capabilities. And the significance for China is great--its 
economic decisions will be subject to multilateral trade 
review, which will provide us additional leverage in resolving 
future trade disagreements with China.
    Our bilateral agreement with China is highly specific with 
clear timetables for implementation and firm end dates for full 
compliance. When copies of the agreement were handed out to 
Members of Congress, some members commented that the text 
looked more like a spread sheet with its defined tariff rates, 
dates certain and concrete obligations. This was intentional 
and reflects past experience with trying to enforce trade 
agreements with China. The specificity of China's commitments 
in this bilateral agreement will strengthen our ability to 
monitor and demand compliance.
    The Administration intends to vigorously monitor and 
aggressively enforce the terms of this agreement. Our 
commitment to do so is reflected in the President's budget 
request for a $22 million increase in new compliance and 
enforcement resources for Commerce, USTR, USDA and the State 
Department.
    In addition, today, I am announcing a five-point plan for 
monitoring China's compliance with its commitments and making 
sure that we get the full benefits of the WTO from our 
bilateral agreements. This is Commerce's part of an interagency 
effort to ensure China's compliance with the WTO. Most elements 
of Commerce's plan will be put in place immediately.
    Rapid Response Compliance Team. I am creating a Deputy 
Assistant Secretary for China focusing on compliance. This will 
be the highest level Commerce official we have devoted to a 
single country's compliance with a trade agreement. Working 
with the DAS will be a rapid response team of at least 12 
compliance and trade specialists in Washington and China, most 
of whom are already on the payroll. I am sending a senior 
compliance officer to China next week to assess the needs and 
priorities of the business community. In the medium term, I 
want to station compliance officers permanently in China. This 
is part of the President's $22 million Trade Compliance 
Initiative in the 2001 budget request. These officers will be 
exclusively devoted to compliance matters, not trade promotion 
and not economic analysis. The State Department also plans to 
place additional compliance officers in China, and is currently 
developing a specialized training course to equip new officers 
from all agencies with a deeper understanding of our 
international agreements to ensure compliance.
    Prompt addressing of market access problems. I am putting 
in place tight deadlines for investigating market access and 
commercial problems in China. Within strict deadlines, the 
rapid response team will engage appropriate officials in China 
to address the problem. If resolution is not reached within 90 
days, we will work with other agencies to determine if further 
action is required. The goal of this procedure will be to 
encourage resolution of issues without resorting to WTO dispute 
settlement. To make this procedure more user-friendly, I will 
launch a China compliance website. It will contain a detailed 
description of China's accession commitments in all sectors, 
the relevant ministries and key individuals responsible for 
implementing the commitments, and most significantly, changes 
in China's laws and regulations to implement the new 
commitments as they are promulgated.
    Statistical monitoring of Chinese trade flows and special 
trade law enforcement program. I am putting together a special 
team to monitor both imports from China and exports to China in 
critical sectors. This will be modeled on the import surge 
monitoring program we established for steel, which has been so 
effective in helping to combat last year's steel crisis. The 
data collected will help to implement the China-specific 
safeguard that we negotiated. In addition, the data collected 
will be useful in vigorously enforcing our other trade laws. As 
I mentioned earlier in my testimony, we have maintained our 
ability to apply our non-market economy methodology to China 
for 15 years. To ensure strict enforcement, I am creating a 
China-specific dumping anticircumvention program. In addition, 
I am creating a China-specific subsidies enforcement team to 
ensure that China abides by its subsidy commitments.
    Comparative law dialogue and technical assistance. I know 
many of you are concerned about China bringing its laws into 
conformity with the WTO. We share your concerns. So when I was 
in China last month, I obtained agreement to set up a 
comparative law dialogue. We will keep a close watch as China 
amends its laws and regulations, share our experience with 
implementing WTO rules, and provide technical assistance and 
advice. We will begin meetings in June. These efforts will be 
closely coordinated with the Department of State's China Rule 
of Law Initiative which stems from the Presidential agreement 
with China to expand cooperation for addressing rule of law 
issues throughout the Chinese legal system.
    China-specific WTO training and export promotion program. 
Finally, we are setting up an unprecedented WTO training and 
trade promotion strategy to ensure that our exporters take 
advantage of all the opportunities presented by China's new 
commitments. This will include a trade opportunities service 
similar to what we did for Eastern Europe after the fall of the 
Berlin wall and for the Middle East after the Gulf War. We will 
use our nation-wide network of export assistance centers and 
video conferencing to conduct seminars for small and medium 
companies on doing business in China and promoting export 
opportunities. We are establishing a China market information 
website and will assign a China expert to our trade information 
center hotline. We will provide U.S. businesses with training 
about U.S. rights under the WTO agreement.

Community Economic Adjustment Initiative

    In addition to compliance, let me highlight another 
Administration effort that addresses a concern of many Members: 
the impact of trade on U.S. workers and communities. President 
Clinton has requested in the FY2001 budget a substantial 
increase to help U.S. workers and communities succeed in the 
global economy. The package includes a Community Economic 
Adjustment Initiative modeled on the Department of Defense's 
program to help communities slated for military base closures. 
This program, based at Commerce's Economic Development 
Administration, would coordinate Administration-wide responses 
for regions adversely affected by trade or other problems.
    The package would also consolidate and reform the 
Department of Labor's two trade adjustment assistance programs 
for workers who lose their jobs due to imports or shifts in 
production, capturing the best features of each. It also would 
greatly expand the President's New Market Initiative by 
providing investment incentives to spur economic activity in 
distressed urban and rural areas.

A More Open China

    The President has made clear that supporting China's 
accession into the WTO does not mean a tacit endorsement of 
China's human rights policies. We will continue to denounce 
China's persecution of its citizens for their political or 
religious beliefs. Last month, Secretary of State Albright 
demonstrated this commitment when she personally presented a 
resolution condemning China's human rights record to the United 
Nations' Human Rights Commission in Geneva. We will not 
hesitate to use our authority to sanction China under the 
International Religious Freedom Act as we did last year. We 
will also continue to pursue our foreign policy goals with 
China in a number of important areas such as non-proliferation 
and global climate change. We remain committed to a peaceful 
resolution of issues between China and Taiwan.
    It is significant that many of those most supportive of a 
more open, democratic China support its membership in the WTO. 
The newly elected leader of Taiwan, Chen Shui-bian, supports 
normalizing trade relations between the United States and 
China. Martin Lee, the leader of Hong Kong's Democracy Party, 
recently said ``The participation of China in the WTO would not 
only have economic and political benefits, but it would serve 
to bolster those in China who understand that the country must 
embrace the rule of law.'' A longtime Chinese dissident leader, 
Ren Wanding, declared in support of the China's WTO membership 
``Before the sky was black, now it is light. This can be a new 
beginning.''
    By seeking to join the WTO, China has undertaken to deepen 
its market reforms and open its economy to the rest of the 
world. It has agreed to adhere to international trade rules and 
subject its actions to WTO dispute settlement. It's clear that 
this has not been an easy choice for its leaders. They 
understand that opening their borders to foreign goods, 
services and investors opens the door wide to new ideas and 
ideals they can not control. They have made the decision to 
take this risk. We should encourage China to choose the path of 
reform and involvement with the rest of the world. Bringing 
China into the WTO will make a significant difference.
    The possibility of positive change is illustrated by the 
great potential of the telecommunications market in China. Some 
analysts predict that China will become the world's second 
largest personal computer market by the end of this year and 
the third largest semiconductor market by 2001. It is already 
the world's fasted growing telecommunications market. In 1999 
alone, the number of Chinese Internet users quadrupled, jumping 
from 2 million at the beginning of the year to 9 million. 
Growth predictions put Internet users at over 20 million by the 
end of 2000. Not only will this technology explosion benefit 
U.S. information technology industry, which is the best and 
most competitive in the world, but it will also give the 
Chinese people unfettered access to outside influences and 
ideas through satellites and the Internet. This cannot help but 
promote greater economic and political reform in China.
    Of course, the trade agreement with China will not, by 
itself, resolve serious human rights issues in China. At the 
same time, I believe that WTO membership will bring fundamental 
changes to China that will advance our goals in this area.
The Vote on PNTR

    A few months ago when the President asked me to lead the 
Administration's efforts to seek Congressional approval of 
PNTR, I discovered that there was a lot of misunderstanding 
about what the vote on PNTR means. Let me explain. Normal trade 
relations, formerly called most-favored-nation or MFN 
treatment, is the same trading status we extend to the rest of 
the world, with very few exceptions. The legislation would 
remove China from the annual NTR renewal process under Jackson-
Vanik, under which we have extended NTR to China since 1980.
    PNTR is required to meet our obligation to treat all WTO 
members the same. WTO members are required to grant each other 
``any advantage, favor, privilege or immunity'' provided to 
other countries ``immediately and unconditionally.'' The United 
States currently extends PNTR to all countries with whom we 
share and enjoy the benefits of the WTO, without the condition 
of annual review. Not surprisingly, China seeks identical 
treatment upon its accession--and WTO rules require it to be 
provided.
    It is worth emphasizing that this will not be a vote on 
whether China will join the WTO. Once China completes its 
accession negotiations with other countries, its application to 
join the WTO will move forward, with or without PNTR. However, 
Congress' upcoming vote on PNTR will determine whether the 
United States will enjoy the economic benefits created by 
China's WTO membership. A vote against PNTR will mean ceding 
our share of this newly opened market to our economic 
competitors in Europe, Asia and elsewhere. As President Clinton 
has stated, ``We must understand the consequences of saying no. 
If we don't sell our products to China, someone else will step 
into the breach, and we will spend the next 20 years wondering 
why in the wide world we handed over the benefits we negotiated 
to other people.''
    The vote on PNTR also will not affect whether the Chinese 
will have access to the American market and consumers. They 
already do. The United States has the most open market in the 
world. A vote for PNTR will give us access to the previously 
closed Chinese market and level the playing field in a dramatic 
way.
    When President Nixon first went to China, more people saw 
the pictures and heard his words than on any occasion in the 
history of the world. During that visit he paraphrased Abraham 
Lincoln, saying ``what we say here would not be long 
remembered. What we do here can change the world.'' Thirty 
years later, we now face another history-making foreign policy 
choice, identified by President Clinton as his top remaining 
foreign policy goal. After all the speeches, after all the 
arguments, after all the voices on both sides of the debate, 
what we say is not as important as what we do. And on this 
occasion we should act to promote further reform and the rule 
of law in China and to integrate China into the world economy. 
It is in our economic, strategic and national security 
interests to do so.
    I appreciate the thoughtfulness and consideration Members 
have brought to the debate. I am optimistic that once all the 
pros and cons have been weighed the Congress will vote its 
support for PNTR.
    Thank you, Mr. Chairman, that concludes my statement. I 
will now be happy to answer any questions you may have.
    [Attachment is being retained in the Committee files.]
      

                                


    Chairman Archer. Thank you, Secretary Daley.
    Our last witness in this panel is a lady that has done 
yeoman work in negotiating trade agreements in behalf of this 
country, and one of the truly outstanding USTRs in the history 
of the country. We welcome you to the Committee, Ms. 
Barshefsky, and we'll be pleased to receive your testimony.

   STATEMENT OF HON. CHARLENE BARSHEFSKY, AMBASSADOR, UNITED 
                  STATES TRADE REPRESENTATIVE

    Ambassador Barshefsky. Thank you very much, Mr. Chairman.
    May I first begin on a slightly different topic, and that 
is the African Growth and Opportunity Act. I want, Mr. 
Chairman, in particular, to recognize Mr. Rangel, Mr. Crane, 
Mr. McDermott, Mr. Jefferson, and you for all of your hard work 
and the work of your staffs in trying to bring together this 
very historic piece of legislation.
    I think we're almost at the finish line, and I simply 
wanted to reiterate the Administration's strong support of your 
collective efforts to move this legislation forward, and our 
hope that it will come to the Floor of the House of 
Representatives, if not this week, then next. And I simply 
wanted to thank you on behalf of the Administration for the 
extraordinary effort that collectively all of you and the 
Committee have put into this legislation.
    It's a great pleasure to be here to speak about China. In 
my previous appearance before the Committee in February, we 
discussed a number of the specific commitments included in our 
bilateral WTO agreement with China. My written statement 
reviews them in detail. For the present, let me simply say that 
from the perspective of trade and economic policy, the choice 
before this Committee and before the Congress is absolutely 
straightforward.
    This agreement with China will open China's markets, a 
market that will be the largest single market in the world, to 
the full range of American exports of industrial goods, farm 
products and services, to a degree unprecedented in the modern 
era. It will strengthen our guarantees of fair trade. It will 
give us great ability to enforce China's trade commitments, and 
it will facilitate Taiwan's entry into the WTO, as Taiwan's new 
leadership has noted, in its support both for China's WTO 
membership and normalized trade relations between China and the 
United States.
    By contrast, as China enters the WTO, we make no changes 
whatsoever in our market access policies, not a single tariff 
line. We make no changes in our trade laws. We make no changes 
in our laws governing the export of sensitive technology. We 
agree only, only to maintain the market access policies we 
already apply to China and have in every year, year in, year 
out, for over 20 years, by making China's current normal trade 
relations status permanent.
    This is the only policy issue before the Congress. 
Regardless of the Congressional debate, China will enter the 
WTO. Regardless of the debate, China will continue to export to 
the United States, just as it does today. The only question 
raised by permanent NTR is whether we will receive the benefits 
of China's accession to the WTO, whether we will receive the 
benefits of the agreement we negotiated, or will we have opened 
the Chinese market for the rest of the world's producers, while 
our farmers and our workers and our ranchers are left behind?
    That is the issue that is squarely presented by the 
question of permanent normal tarde relations for China. And I 
would submit that on that basis, the economic choice is 
absolutely clear.
    But there are two questions I believe that arise and that 
should be addressed. First off, as Secretary Daley has 
indicated, how do we help ensure that China will comply fully 
with its obligations and second, what do WTO accession and PNTR 
imply for our larger relationship with China and the concerns 
we now have with that relationship?
    Let me take compliance first. Trade commitments with any 
country require full implementation to be meaningful. This 
Administration has pursued well over 100 trade enforcement 
actions in the past 7 years. In the case of China, we've gained 
substantial experience, given our enforcement actions on 
intellectual property rights, on textiles, on agriculture and 
in other areas. We've brought these lessons of compliance to 
the current debate. And let me outline for you seven areas.
    First, with respect to compliance and enforcement, we have 
the WTO dispute settlement mechanism itself. In no previous 
international accord, and let me repeat that, in no previous 
international accord, has China ever agreed to subject its 
governmental decisions to impartial review, judgment and 
sanctions if necessary.
    Second, our continued right to use the full range of U.S. 
trade laws, anti-dumping laws, Section 301, special 301 and so 
on. Third, substantial new leverage through a 12 year product 
specific safeguard mechanism which enables us to address market 
disrupting import surges from China. This is a remedy that 
exists for no other country in the world. It is a remedy that 
does not currently exist in U.S. trade law.
    Fourth, guarantees of our right to continue to use a 
special non-market economy dumping methodology for 15 years to 
ensure fair trade from China. Fifth, the multilateral nature of 
the WTO itself, including in Geneva the development of a 
multilateral review mechanism to monitor China's implementation 
of its commitments, diminishing the ability of China to play 
one trading partner off another and identifying compliance 
problems early.
    Sixth, experience shows that agreements with China are 
implemented and enforced most satisfactorily when obligations 
are concrete, specific, time bound and open to monitoring. The 
bilateral agreement we negotiated contains remarkably specific 
commitments in every area without exception, clear timelines 
for implementation and firm end dates for full compliance.
    Finally, enforcement as in any agreement depends on U.S. 
commitment. We're already preparing for the effort through 
President Clinton's request for new enforcement and compliance 
resources at USTR, Commerce, USDA and other agencies with 
enforcement responsibility. This includes resources for the 
largest monitoring and enforcement effort ever devoted to a 
trade agreement, covering the full range of China's obligations 
in the WTO, including anti-dumping and anti-import surge.
    The Administration will monitor China's compliance on three 
fronts. First, on the ground in China, where State, Commerce, 
Agriculture and other agencies will seek to resolve U.S. 
business complaints and prevent compliance problems before they 
arise.
    Second, here in Washington, where special inter-agency 
teams of government experts will be created to examine China's 
implementation of each of the 20 WTO agreements to which it 
will accede, as well as commitments unique to China, with 
respect to anti-import surge and anti-dumping.
    And third, compliance efforts at the WTO itself, where we 
will join 135 other nations in the multilateral review 
mechanism specially designed for China.
    USTR will add additional resources for this effort. The 
President's budget request would almost double the number of 
USTR staff devoted to China. In addition, as I said, a special 
interagency structure will be created in order to ensure that 
every aspect of Chinese compliance is monitored. We will be 
working with the business community and with Congress in this 
very large effort.
    This agreement and permanent normal trade relations for 
China will have extraordinary significance for our trade 
interests. But its full importance is only clear when we 
consider WTO accession as part of a larger relationship with 
China, a relationship fundamental to prospects for peace and 
security in Asia, and worldwide in the coming decades.
    We have substantial differences with China on issues 
related to human rights and religious freedom, on a number of 
security issues and on other matters. In these areas, we have 
and we will continue aggressively to assert our interests and 
our values.
    But we have also found and acted upon areas of shared 
interest and benefit where possible. The Asian financial 
crisis, peace on the Korean peninsula, and now with WTO 
accession and PNTR, in our shared interest in a more open and 
reformed Chinese economy, which more fully reflects the rule of 
law.
    Moreover, we are doing this through a series of one way 
concessions made by China. Were we to retreat, were we to 
reject this historic series of one way concessions made by 
China, we would be making a very dark statement indeed about 
the future possibility of a stable, mutually beneficial 
relationship with the world's largest economy.
    That outcome would threaten every single interest we have 
in China, from our work on non-proliferation and arms control 
to reducing tensions in Korea and South Asia and across the 
Taiwan Strait. It would complicate for the foreseeable future 
our Pacific alliances, as our Asian friends and allies would 
view rejection of PNTR as an unnecessary rejection of stable 
and constructive relations in their neighborhood, with their 
largest neighbor, and to turn away from the open, confident 
vision we have held for the Pacific for many, many years.
    Over the long term and perhaps most important, China, 
seeing no rational economic reason for our decision, would 
become more likely to read hostile intention into our every 
move. This could raise the prospect that our present 
disagreements and tensions will only escalate. That is the 
ultimate and most significant point at stake in the coming 
debate.
    To deny PNTR would be to severely damage American trade 
interests. It would be to set back the cause of reform and 
economic reformers in China. It would be to risk without cause 
a fundamental deterioration in the U.S. relationship with 
China.
    We must have the vision and the confidence to make the 
right choice here. WTO accession, PNTR for China offers us a 
remarkable opportunity, indeed, a historic opportunity, as many 
members have recognized, to not only advance our own trade 
interests, that frankly is the least of it. But to strengthen, 
as a number of activists for human rights and democracy have 
said, prospects for long term reform within China and 
ultimately to help build a relationship with China that 
strengthens the guarantees of peace and security for the world.
    That is the opportunity that is before the Committee as the 
PNTR debate begins in earnest. And it is why the 
Administration, my Cabinet colleagues and I are absolutely 
committed to achieving permanent normal trade relations status 
for China on the basis of this historic agreement.
    Thank you, Mr. Chairman.
    [The prepared statement follows:]

STATEMENT OF THE HON. CHARLENE BARSHEFSKY, UNITED STATES TRADE 
REPRESENTATIVE

    Mr. Chairman, Congressman Rangel, Members of the Committee:

    The House's vote on extension of permanent Normal Trade 
Relations to China, as China enters the World Trade 
Organization, will be one of the most important trade and 
foreign policy decisions the United States has made in many 
years. I thank you for this opportunity to join with Secretary 
Summers and Secretary Daley, in testifying on its significance 
for the United States.

                   Introduction: One-Way Concessions

    In a sense, this decision presents us with a simple choice.

    Last November, after years of negotiation, we reached a 
bilateral agreement with China on WTO accession which secures 
broad-ranging, comprehensive, one-way trade concessions on 
China's part. These concessions:
    --Open China's markets to American exports of industrial 
goods, services and agriculture to a degree unprecedented in 
the modern era, through specific and detailed commitments on 
tariffs, quotas, trading rights, distribution, sanitary and 
phytosanitary measures, the full range of services industries 
and other issues.
    --Strengthen our guarantees of fair trade, with specific 
provisions to address dumping into the U.S. market, import 
surges, technology transfer as a condition of investment and 
other practices intended to draw jobs and research to China, 
textile trade and other issues.
    --Give us far greater ability to enforce China's trade 
commitments.
    --And facilitate the WTO accession of Taiwan, which has 
made an equally valuable set of market access commitments.
    By contrast, we agree only to maintain the market access 
policies we already apply to China, and have for over twenty 
years, by making China's current Normal Trade Relations status 
permanent.
    This is the only policy issue before Congress. Regardless 
of our decision, China will enter the WTO. Regardless of our 
decision, it will continue to sell in the American market. The 
only question Congress will decide is whether we accept the 
benefits of China's accession and the agreement we negotiated; 
or whether on the contrary, by turning away from permanent NTR, 
we enable our competitors in Asia, Latin America, Canada and 
Europe to take advantage of these benefits while American 
entrepreneurs, farmers and factory workers are left behind.

              I. China's WTO Accession in Historic Context

    From the perspective of trade policy, therefore, this is a 
relatively simple decision. But China's WTO accession also has 
deeper implications.
    China is the world's most populous country; over the past 
decade, it was the world's fastest-growing major economy. Our 
relationship thus affects all of America's foreign policy and 
security goals in Asia today, and its future course will be one 
of the major issues for Americans throughout the next decades. 
And the WTO accession, together with permanent NTR, will have a 
substantial impact on the future of China and our relationship 
with China.
    When we look at our relationship with China today, we see a 
number of serious differences. In these cases, we have and will 
continue to assert our values and interests with candor and 
firmness--as we have recently done at the UN Human Rights 
Commission in Geneva. At the same time, however, we also see a 
responsibility to develop a stable, mutually beneficial 
relationship in which we and China act upon areas of shared 
benefit and mutual interest. China's WTO accession, together 
with permanent NTR, is an example of just such shared interest 
and benefit.
    --By opening the Chinese economy to U.S. goods, services 
and agricultural products, the WTO accession and PNTR will 
create significant new opportunities for American businesses, 
farmers and working people; and it will help to reform and 
improve a deeply imbalanced existing trade relationship.
    --By helping to open and liberalize China's economy, WTO 
accession will create new economic freedoms for Chinese 
citizens and promote the rule of law in many fields now 
dominated by state power and control. A number of leading 
Chinese and Hong Kong advocates of democracy thus endorse WTO 
membership not only for its economic value, but as a foundation 
for broader future reforms.
    --And by integrating China more firmly into the Pacific and 
world economies, WTO accession will give China a greater stake 
in regional stability and prosperity. Together with our 
military presence in the Asia-Pacific and our alliances with 
Japan, South Korea and other Pacific democracies, it will thus 
be a factor in favor of long-term regional peace.

                     America and the Trading System

    Let me now turn to a detailed review of our bilateral 
agreement on WTO accession, beginning with the historic context 
in which we should view this event.
    The World Trade Organization has its roots in the General 
Agreement on Trade and Tariffs, or GATT. Its creation in 1948 
reflected the personal experience of President Truman and his 
European counterparts in Depression and War. They had seen the 
Smoot-Hawley Act in America and similar protectionist policies 
overseas deepen the Depression and contribute to the political 
upheavals of the 1930s. Fifteen years later, they believed that 
by reopening world markets they could promote growth and raise 
living standards; and that, in tandem with a strong and 
confident security policy, as open markets gave nations greater 
stakes in stability and prosperity beyond their borders, a 
fragile peace would strengthen.
    The work they began has now continued for over fifty years, 
and the faith they placed in open markets and the rule of law 
has been abundantly vindicated. Through eight Rounds of 
negotiations, and as 113 new members joined the 23 founders of 
the GATT, we abandoned the closed markets of the Depression era 
and helped to foster a fifty-year economic boom. America, as 
the world's largest importer and exporter, benefits perhaps 
most of all: the efficiency of our industries and the high 
living standards of our families reflect both the gains we 
receive from open markets abroad, and the benefits of our own 
open-market policies at home.
    But the development of the trading system has had equally 
important effects worldwide. As it has developed over the past 
fifty years, the world economy has grown six-fold; per capita 
income nearly tripled; and hundreds of millions of families 
escaped from poverty. And perhaps the best testimony to this 
success is that many of the new applicants to join the WTO are 
nations which are abandoning the postwar experiment in 
communist central planning.

                    China from Revolution to Reform

    This brings me to China.
    With the Communist revolution, China set out upon a very 
different road. After 1949, it shut doors it had once opened to 
the world. Among its new leaders' first steps were to expel 
foreign businesses from China and bar direct economic contact 
between Chinese citizens and the outside world. Inside China 
were similar policies: destruction of private internal trading 
networks linking Chinese cities and villages, abolition of 
private property and land ownership, and of course suppression 
of the right to object to these policies.
    In essence, one cannot separate postwar China's deepening 
isolation from the outside world from its steadily increasing 
internal repression and diminishing space for individual life 
and freedom. Likewise, China's economic isolation had severe 
consequences for regional peace and stability: Asia's largest 
nation had little stake in prosperity and stability--in fact, 
saw advantage in warfare and revolution--beyond its borders. 
Every Pacific nation felt the consequences not only in 
economics and trade but in peace and security.
    China's domestic reforms since 1978 have helped to undo 
this isolation, integrating China into the Pacific regional 
economy as they opened opportunities for Chinese at home. The 
results have been profoundly positive: as China's people 
regained the right to farm their own land, open businesses and 
choose their own places of employment, they have found new 
opportunities both to raise their living standards and 
determine their own futures. At the same time, China has moved 
gradually from a revolutionary role in the region to a 
willingness to play a positive and stabilizing role on issues 
as various as the maintenance of peace on the Korean peninsula 
and the Asian financial crisis.
    And as China has opened its economy to the world, it has 
become a more integrated, responsible member of the Pacific 
community. To choose a specific example, in 1997, South Korea 
and the ASEAN states were the market for $22.3 billion worth of 
Chinese semiconductors, video CD players, rice, apparel and 
other goods. Setting Hong Kong aside, that is one dollar in six 
of China's exports to the world. These countries were also the 
source of $6 billion in foreign direct investment in China, 
meaning (again with Hong Kong excepted) a seventh of the FDI 
China received that year.
    This has implications not only for China's economy, but to 
our own vital interest in a peaceful and stable region--because 
1997 was, of course, the year of the financial crisis. A 
generation ago, China might have seen the event as a 
revolutionary opportunity. In 1997 its reaction was entirely 
different: the crisis was a threat to the export markets that 
support Chinese factories and farm income, and to the Asian 
investment that creates jobs and growth.
    The constructive and stabilizing policies China adopted, 
through currency stability and contribution to IMF-led recovery 
programs, thus reflected basic self-interest. But in historic 
context, they enabled us to deal with the crisis primarily as 
an economic and humanitarian disaster, rather than a security 
crisis. And they are thus evidence of a change in China's view 
of its own regional interests and role whose importance for our 
national security cannot be overstated.

                     The Role of U.S. Trade Policy

    A bipartisan U.S. trade policy over the past thirty years 
has contributed to these positive trends.
    Broadly speaking, our goals have been to support Chinese 
domestic economic reform, integrate China into the Pacific 
regional economy, through a variety of means including 
commercially meaningful agreements that open opportunities for 
Americas. This has extended from the lifting of the trade 
embargo in 1972, to our Bilateral Commercial Agreement in 1980, 
more specific agreements in the 1980s; and then a series of 
recent and highly focused agreements including:
    --Intellectual Property--In the early 1990's, China's 
failure to protect intellectual property rights was one of the 
most problematic aspects in our trading relationship. Piracy of 
films, software, CDs, and other intellectual property-based 
products cost our industry hundreds of millions of dollars and 
led to trade confrontations with China, including invocation of 
sanctions on two occasions. The United States ultimately 
negotiated agreements in 1995, and then won further commitments 
in 1996 that led China to close over 70 pirate production 
facilities; cease the export of pirated products and 
significantly improve enforcement--the principal focus of the 
agreements.
    --Textiles--Likewise, textile transshipment and market 
access barriers have historically been a problem in our textile 
trade relationship with China. While problems remain, two 
separate agreements, in 1994 and 1997, combined with sustained 
enforcement efforts by the U.S. Customs Service and the 
Administration, as well as imposition of triple charge 
penalties, have helped to mitigate these problems. The 1997 
agreement, in fact, committed China for the first time to 
significantly reduce its textile import restrictions.
    --Agriculture--Most recently, our Agreement on Agricultural 
Cooperation in April of 1999 lifted long-standing bans on 
exports of American citrus, meats and Pacific Northwest wheat, 
imposed due to China's unscientific sanitary and phytosanitary 
measures. As in the cases of intellectual property and 
textiles, we continue to hold frequent consultations with the 
Chinese authorities charged with implementing the agreement, 
and have seen very significant results in the first shipments 
of Pacific Northwest wheat, California and Florida citrus, and 
U.S. meats to China.
    Taken as a whole, this work has helped to open the Chinese 
economy; created a series of new opportunities for Americans; 
and given the Chinese public a much broader array of contacts 
with the outside world than at any time since the late 1940s. 
But the work is only partly done.
    China's trade barriers remain very high; a number of 
policies dating from the 1950s are still unchanged; and China's 
integration with the world economy remains insecure. Likewise, 
China's neighbors remain blocked from an economy which--like 
Japan's--could be an engine of growth. One index of this is our 
substantial trade deficit with China. Another is that since we 
extended Normal Trade Relations (formerly MFN status) to China 
in 1980, our exports to China have grown by only $10 billion, a 
figure significantly less than our total growth to most other 
major trading partners in Europe, North America and East Asia.

       II. China's WTO Accession, PNTR, and U.S. Trade Interests

    The WTO accession agreement therefore builds upon thirty 
years of work, to reach a detailed, specific and enforceable 
series of commitments covering the range of American trade 
priorities in China. As China has looked to WTO accession to 
create jobs and foster sustainable growth through economic 
reform, we have won commercially meaningful and enforceable 
commitments that help Americans on the farm and on the job 
export to China by addressing the many layers of trade barriers 
and policies which limit access; strengthen guarantees of fair 
trade; and give us additional tools for enforcement and 
compliance.
    Thus, in all respects, this bilateral agreement meets the 
high standards President Clinton set years ago. Let me now 
offer an overview of the agreement, and then turn to its 
specific features.

                                Overview

    First, our bilateral agreement is comprehensive. It will 
reduce Chinese trade barriers across the range of goods, 
services and agricultural products; eliminate or sharply reduce 
restrictions on freedom to import and distribute goods within 
China; address industrial policies intended to draw jobs and 
technology to China; and strengthen our guarantees of fair 
trade practices. All these reflect the ideas, advice and 
guidance we have received over years of negotiations from 
Members of the Committee and Congress as a whole.
    Second, it is fully enforceable. China's commitments in all 
areas are specific and include timetables and final dates for 
full implementation. These commitments are enforceable through 
our trade laws, WTO dispute settlement and other special 
mechanisms including periodic multilateral review of China's 
implementation and compliance. These will, of course, require 
vigilance and constant commitment to enforcement by the United 
States as well as by China's other trading partners in the WTO. 
We are committed to vigorous monitoring and enforcement, and 
are already preparing for this through a number of different 
means: for example, the President's budget this year requests a 
tripling of the Commerce Department's budget for China trade 
enforcement, and an additional full-time China officer at USTR.
    And third, its results will be rapid. On accession to the 
WTO, China will begin opening its market from day one in 
virtually every sector. The phase-in of further concessions 
will be limited to five years in almost all cases, and in many 
cases one to three years.
    I will now turn to a review of the details in each major 
sector.

                                Industry

    In industrial goods, China will cut tariffs from an average 
of 24.6% in 1997 to 9.4% by 2005 and bind them at these new, 
lower levels. It will eliminate quotas and other numerical 
restrictions. And it will allow American firms to import and 
distribute their products freely in China. This is essential, 
as American companies, farmers and workers need the ability to 
import, export and distribute goods in China to compete 
effectively--rights currently denied but which will be 
permitted under the agreement, allowing our businesses to 
export to China from here at home, and to have their own 
distribution networks in China, rather than being forced to set 
up factories there to sell products through Chinese partners. 
Some highlights include:
    Trading Rights--China will grant American companies, over a 
three-year phase-in period, rights to import and export most 
products without Chinese middlemen. Currently, the right to 
engage in trade (importing and exporting) is strictly limited; 
only companies that receive specific authorization or who 
import goods to be used in production have such rights. This 
limits not only the ability of U.S. companies to do business in 
China, but in particular has limited U.S. exports.
    Fertilizer--As an addendum to our November 1999 bilateral 
agreement, we have reached an agreement with China that will 
effectively provide market access for U.S. fertilizer. The 
agreement sets up a TRQ system for importation of fertilizer 
products of priority interest to the United States that is 
similar to the system we negotiated for agricultural products.
    Distribution--As in the case of trading rights, the right 
to distribute products is critical to our ability to export 
successfully to China. After accession, China will allow 
American firms to market, wholesale, retail, repair and 
transport their products--whether produced in China or 
imported. At present, China generally prohibits companies from 
distributing imported products or providing related 
distribution services such as repair and maintenance services. 
China will permit enterprises to engage in the full range of 
distribution services over a three-year phase-in period for 
almost all products.
    Tariffs--China will make substantial tariff cuts on 
accession with further cuts phased in, two thirds of which will 
be completed in three years and almost all of which will be 
completed within five years. On U.S. priority industrial items, 
tariffs will drop on average to 7.1%--a figure comparable to 
those of most major U.S. trading partners. As in agriculture, 
China will bind tariffs at these low levels. Some specific 
examples include:
    Information Technology Agreement--China will participate in 
the Information Technology Agreement (ITA), eliminating all 
tariffs on such information technology products as 
semiconductors, telecommunications equipment, computer and 
computer equipment and other items by 2003 in most cases and 
2005 in a few others.
    Autos--China will reduce tariffs on autos from rates of 
80%-100% today to 25% in 2006, and on auto parts to an average 
of 10% from an average of over 23%.
    Wood and Paper Products--China will reduce high tariffs on 
wood and paper to levels generally about 5% and 7.5% 
respectively. As noted below, China will also implement any 
sectoral APEC Accelerated Tariff Liberalization initiative 
adopted by the WTO in this sector.
    Chemicals--China will commit to the vast bulk of chemical 
harmonizations, reducing tariffs from present rates between 
10%-35% to an average rate of 6.9%. These reductions include 
reductions on all priority U.S. chemical exports.
    Furniture--China will reduce its current average tariff 
rate of 22% to 0% on all furniture items covered by the Uruguay 
Round sectoral initiative, by 2005.
    Accelerated Tariff Liberalization--China has agreed to 
implement the Accelerated Tariff Liberalization initiative of 
APEC now under consideration in the WTO, when consensus is 
achieved. This would eliminate tariffs on forest products, 
environmental goods and services, energy and energy equipment, 
fish, toys, gems and jewelry, medical equipment and scientific 
instruments, and also includes chemical harmonization.
    Non-Tariff Barriers--China will eliminate quotas and other 
quantitative restrictions upon accession for top U.S. 
priorities, including certain fertilizers and fiber-optic 
cable.

                              Agriculture

    In agriculture, China will make substantial reductions in 
tariffs both on accession to the WTO and over time. It will 
adopt tariff-rate quotas that provide significant market access 
for bulk commodities of special importance to American farmers. 
It will agree to apply science-based sanitary and phytosanitary 
standards including in grains, meats and fruits. And it will 
eliminate export subsidies. Notable achievements here include:
    Tariffs--China's agricultural tariffs will fall from 31% to 
14% for our priority items. All cuts occur over a maximum of 
four years, and will be bound at the applied levels. To cite a 
few examples:



                                                 Current      Under the
                                                  Level       Agreement

Beef........................................          45%           12%
Pork........................................          20%           12%
Poultry.....................................          20%           10%
Citrus......................................          40%           12%
Grapes......................................          40%           13%
Apples......................................          30%           10%
Cheese......................................          50%           12%
Crayfish....................................          30%           15%
Lobster.....................................          30%           15%
Wine........................................          65%           20%
Beer........................................          70%            0%


    TRQs--China will liberalize its purchase of key bulk 
agricultural commodities like wheat, corn, rice, cotton and 
soybean oil, through tariff-rate quotas--that is, application 
of very low tariffs (1% for bulk commodities) on a set volume 
of commodities. We include in this portion of the agreement 
provisions to maximize the likelihood that these TRQs are 
filled. In particular, a portion of each TRQ is reserved for 
importation through private traders, and TRQs which have not 
been filled by a set date will be redistributed to other end-
users with an interest in importing on a first-come, first-
served basis. Some salient examples include:



                                                           1998 Total                                  Private
                                                             Imports     Initial TRQ    2004 TRQ        Share

Cotton..................................................   200,000 mt    743,000 mt    894,000 mt           67%
Wheat...................................................  2,000,000 mt  7,300,000 mt  9,636,000 mt          10%
Corn....................................................   250,000 mt   4,500,000 mt  7,200,000 mt   25%, grows
                                                                                                         to 40%
Rice total..............................................   250,000 mt   2,660,000 mt  5,320,000 mt
short/med grain.........................................  ............  1,330,000 mt  2,660,000 mt          50%
long grain..............................................  ............  1,330,000 mt  2,660,000 mt          10%


    Export Subsidies--China will eliminate agricultural export 
subsidies. This is an important achievement in its own right, 
and a step toward our goal of totally eliminating export 
subsidies worldwide.
    Domestic Support--China has committed to cap and reduce 
trade-distorting domestic subsidies. China also committed to 
provide greater transparency to make its domestic support 
measures more predictable.
    Sanitary & Phytosanitary Standards--China will agree to 
apply sanitary and phytosanitary standards based on science. 
Among other things, this will give us additional means of 
enforcing the Agreement on Agricultural Cooperation and its 
commitment to lift longstanding bans on American meats, citrus 
fruit and Pacific Northwest wheat.

                                Services

    In services, China will open markets across the spectrum of 
distribution services, financial services, telecommunications 
including the Internet, professional, business and computer 
services, motion pictures, environmental services, and other 
industries.
    Grandfathering--China will protect the existing activities 
and market access of all service providers operating in China 
at the time of accession.
    Distribution--As noted above, China now generally prohibits 
firms from distributing products other than those they make in 
China, or from controlling their own distribution networks. 
Under the Agreement, China has agreed to liberalize wholesaling 
and retailing services for most products, including imported 
goods, throughout China within three years. This will remove 
all restrictions on wholesaling, retailing, maintenance and 
repair, marketing, customer service and transportation, along 
with restrictions on auxiliary services including trucking and 
air express delivery, air courier, rental and leasing, storage 
and warehousing, advertising and others. This is of immense 
importance in its own right and as a step that will enable our 
exporters to do business more easily in China.
    Insurance--Currently only two U.S. insurers are operating 
in China's market. With WTO accession, China agrees to award 
licenses solely on the basis of prudential criteria, with no 
economic-needs test or quantitative limits on the number of 
licenses issued; progressively eliminate geographic limitations 
within three years, and permit internal branching consistent 
with the elimination of these restrictions; over five years 
expand the scope of activities for foreign insurers to include 
group, health and pension lines of insurance. For non-life 
insurance, branch and joint-ventures at 51 percent equity share 
are permitted on accession, and wholly-owned subsidiary 
permitted within two years from date of accession. For life 
insurance, joint ventures are permitted with the partner of 
choice at 50 percent equity share upon accession.
    Banking--Currently foreign banks are not permitted to do 
local currency business with Chinese clients, and only a few 
can engage in local currency business with their foreign 
clients. China also imposes severe geographic restrictions on 
the establishment of foreign banks. With this agreement, China 
commits to full market access in five years for U.S. banks. 
China will allow internal branching and provide national 
treatment for all newly permitted activities. It will also 
allow auto financing on accession, and allow local currency 
business with Chinese enterprises starting two years after 
accession, and allow local currency business with Chinese 
individuals from five years after accession. Both geographic 
and customer restrictions will be removed in five years.
    Securities--China will permit minority foreign owned joint 
ventures to engage in fund management on the same terms as 
Chinese firms. Minority joint ventures will be allowed to 
underwrite domestic equity issues and underwrite and trade 
other securities (debt and equity). As the scope of business 
expands for Chinese firms, foreign joint venture securities 
companies will enjoy the same expansion in scope of business. 
China has also agreed to hold regular consultations with the 
U.S. Treasury Department under the auspices of our Joint 
Economic Commission with China. The purpose of this is to 
exchange information and assist the development of China's 
financial and capital market.
    Telecommunications--China now prohibits foreign investment 
in telecommunications. With WTO accession, it will join the 
Basic Telecommunications Agreement, implementing regulatory 
principles including interconnection rights and regulatory 
rules. It will end geographic restrictions for paging and 
value-added services such as the Internet within two years, 
mobile and cellular within five years, and domestic wireline 
and closed user groups in six. It will also end its ban on 
foreign direct investment in telecommunications services, 
allowing 49% foreign investment in all services and 50% foreign 
ownership for value-added and paging services in two years.
    Audiovisual--China does not now allow foreign participation 
in distribution of sound recordings. Under the agreement, China 
will allow 49% foreign equity for the distribution of video and 
sound recordings, majority ownership in three years for 
construction and ownership and operation of cinemas. China has 
also agreed to allow the importation of 20 films per year on a 
revenue-sharing basis.
    Travel and Tourism--U.S. travel agencies will now be able 
to provide a full range of services for Americans in China, 
such as access to government resorts and major tourist centers.
    Other--Also covered is a broad range of other services--
architecture, engineering, accounting, legal, computer and 
business services, environmental services, franchising, express 
delivery and many more. In each, China has made specific, 
enforceable commitments that open markets and offer competitive 
American industries important new opportunities.

                            Protocol Issues

    Finally, our bilateral agreement deals, appropriately, with 
the special and unusual characteristics of the Chinese economy. 
These include the high degree of state participation in the 
Chinese economy; a series of industrial policy measures 
intended to draw jobs and technology from the U.S. and other 
trading partners to China, such as local content, offset and 
export performance requirements as well as forced technology 
transfer; and special measures to address import surges from 
China and unfair export practices like dumping.
    Altogether, no agreement on WTO accession has ever 
contained stronger measures to strengthen guarantees of fair 
trade and to address practices that distort trade and 
investment. China's major commitments in this regard include:
    Import Surge Protection--China has agreed to a twelve-year 
product-specific safeguard provision, which ensures that the 
U.S. can take effective action in case of increased imports 
from China which cause market disruption in the United States. 
This provision applies to all industries, permits us to act 
based on lower showing of injury, and act specifically against 
imports from China.
    Non-Market Economy Dumping Methodology--China's WTO entry 
will guarantee our right to continue using our current ``non-
market economy'' methodology in anti-dumping cases for fifteen 
years after China's accession to the WTO.
    Subsidies--Likewise, when we apply our countervailing duty 
law to China, we will be able to take the special 
characteristics of China's economy into account. Specifically, 
where government benefits are provided to an industry sector 
and state-owned enterprises are the predominant recipients or 
receive a disproportionate share of those benefits, the United 
States could take action under our unfair trade laws. The 
agreement also establishes that the U.S. can determine whether 
government benefits, such as equity infusions or soft loans, 
have been provided to an industry using market-based criteria 
rather than Chinese government benchmarks.
    Investment Reforms--China will reform a large number of 
policies intended to draw jobs and technology away from China's 
trading partners. It will, for example, implement the WTO's 
Agreement on Trade-Related Investment Measures agreement on 
accession; eliminate mandated offsets, local content and export 
performance requirements and refuse to enforce contracts 
containing these requirements; and not condition investment 
licenses on performance requirements of any kind. All of this 
will make it significantly easier for Americans to export to 
China from home, rather than seeing companies forced to set up 
in China in order to sell products there.
    Technology Transfer--China will abolish requirements for 
technology transfer for U.S. companies to export or invest in 
China. This will better protect our competitiveness and the 
results of U.S. research and development.
    State-Owned and State-Invested Companies--China commits 
that state-owned companies and state-invested enterprises will 
make purchases and sales solely on commercial terms, specify 
that purchases by these companies for commercial and non-
governmental purposes are not government procurements and thus 
are not subject to any special or different rules that could 
undercut basic WTO commitments, and provide U.S. firms the 
opportunity to compete for sales and purchases on non-
discriminatory terms and conditions.
    Textiles--Under our agreement, quotas will remain in effect 
for Chinese textiles as for those of other WTO members until 
2005. From then until January of 2009, we will have a special 
safeguard enabling us to address market-disrupting import 
surges from China in the textile sector. This is in addition to 
the broader product-specific safeguard noted above.

                       Compliance and Enforcement

    Of course, trade commitments require full implementation 
and enforcement to be meaningful in practice. Our previous 
successes in improving intellectual property rights and 
enforcing textile commitments demonstrate how crucial constant 
oversight, monitoring, and strict enforcement are in the case 
of China, and our trading partners in general. And with China's 
WTO membership, we will gain a number of advantages in 
enforcement we do not now enjoy.
    First is the WTO dispute mechanism itself. In no previous 
agreement has China agreed to subject its decisions to 
impartial review, judgment and ultimately imposition of 
sanctions if necessary.
    Second, of course, is our continued right to use the full 
range of American trade laws, including Section 301, Special 
301, and our countervailing duty and anti-dumping laws.
    Third, we gain substantial new leverage by creating the 
product-specific safeguard, as well as guaranteeing our right 
to use non-market economy antidumping methodologies. These 
features of the accession will significantly strengthen our 
ability to ensure fair trading practices.
    Fourth, and very significant, we strengthen our enforcement 
capabilities through the multilateral nature of the WTO. The 
accession, to begin with, will create a multilateral review 
mechanism to monitor all of China's implementation closely. And 
as these commitments come into effect, China will be subject to 
enforcement by all 136 WTO members, significantly diminishing 
China's ability to play its trading partners off against one 
another. In all previous disputes over Chinese compliance with 
agreements, notably those over intellectual property, the 
United States had to act alone. With China in the WTO, we will 
be able to work with 135 other members, many of whom will be 
concerned about the same issues we raise and all of whom will 
have the legal right to enforce China's commitments.
    Fifth, the specificity of China's commitments in this 
bilateral agreement will help us ensure that China complies. 
Experience shows that agreements with China are implemented and 
enforced most satisfactorily when obligations are concrete, 
specific, and open to monitoring. Our bilateral agreement 
therefore includes highly specific commitments in all areas, 
clear time-tables for implementation, and firm end-dates for 
full compliance. These allow us carefully to monitor China's 
compliance and present clear evidence of failure to comply.
    Finally, however, enforcement (as in any agreement) depends 
on U.S. commitment. We will relentlessly monitor and enforce 
China's compliance with its Protocol of Accession and all of 
the WTO agreements. We are already preparing for an increased 
monitoring and enforcement effort through President Clinton's 
request for $22 million in new enforcement and compliance 
resources for USTR, the Commerce Department, USDA, and the 
State Department. The President has requested resources for the 
largest monitoring and enforcement effort for any agreement 
ever, covering China's obligations in the WTO and strong 
enforcement of our trade laws.
    The additional resources sought for the Office of the U.S. 
Trade Representative in the FY 2001 budget would create new 
positions in four areas of expertise--legal, economic, 
geographic, and sectoral--to be devoted to negotiating, 
monitoring, and enforcing trade agreements; and would almost 
double the number of USTR staff dedicated to China trade 
compliance. President Clinton's initiative also would triple 
resources at the Department of Commerce dedicated to China--
including administration of our antidumping and countervailing 
duty laws.
    The Administration will be monitoring China's compliance on 
three fronts: (1) on-the-ground in China, where State, Commerce 
and Agriculture officers will seek to resolve U.S. business 
complaints and prevent compliance problems before they arise; 
(2) here in Washington, where special interagency teams of 
government experts will be created to examine China's 
implementation of each of the 20 WTO agreements as well as WTO 
commitments unique to China; and (3) at the WTO in Geneva, 
where the United States will join 135 other WTO members in the 
multilateral review mechanism designed especially for China.
    USTR will create a special interagency structure that 
coordinates these initiatives to ensure that China fully 
complies with the commitments it has made. This will bring 
together our government's experts on both China and the subject 
matter of each of the 20 WTO agreements, to regularly and 
vigorously monitor China's compliance with all of the WTO 
agreements. These interagency teams will monitor everything 
from China's implementation of its tariff-rate quota 
commitments to the grant of insurance licenses and trading 
rights. Where they find non-compliance, we will use all the 
tools available to us--under our trade laws, the WTO dispute 
settlement mechanism, the various WTO committees, and the 
special WTO transitional review mechanism--to ensure 
implementation. In addition, we will create two new interagency 
committees to oversee two unique features of this historic 
agreement: one dedicated to U.S. participation in the 
multilateral review mechanism, and one to implement the 
product-specific safeguard mechanism to address import surges.
    These interagency groups will base their work on 
information gathered from the American Embassy in Beijing, the 
Foreign Agricultural Service and Foreign Commercial Service; 
advice received from the business community, the agricultural 
community, trade associations, organized labor, and other non-
governmental organizations; and information received from the 
public, including information received in response to requests 
for comment, via agency Web sites, and the Department of 
Commerce's domestic district office network.
    The Administration will continue to work with Congress and 
American workers, farmers, and businesses to ensure effective 
monitoring and quick responses to non-compliance. At the same 
time, we will seek to prevent or reduce problems by working 
with the Chinese, including through technical assistance where 
appropriate, to ensure they fully understand their new 
obligations. WTO rules will require real and meaningful changes 
in China's application of trade rules and policies, and 
consultation and training will help head off problems before 
they arise.

                    Permanent Normal Trade Relations

    By contrast to this comprehensive set of Chinese 
commitments, the U.S. commitment is merely to continue our 
present policies. Thus, the United States:
    --Makes no changes in our current market access policies.
    --Preserves our right to withdraw market access for China 
in the event of a national security emergency.
    --Requires no changes in our laws controlling the export of 
sensitive technology.
    --Amends none of our trade laws.
    Our sole obligation is to grant China permanent NTR. This 
is, in terms of our policy toward China, no real change. NTR is 
simply the tariff status we have given China since our 
Bilateral Commercial Agreement and normalization of diplomatic 
relations in 1979; which Congress has reviewed every year 
since, and found to be in our fundamental national interest. 
Under the legislation President Clinton sent to Congress on 
March 8th, permanent NTR would only be available to China when 
the President certifies that China has entered the WTO on the 
basis of the commitments we reached in our bilateral agreement.
    Thus permanent NTR represents little real change in 
practice. But the legislative grant of permanent NTR is 
critical, as without permanent NTR we risk losing the full 
benefits of the agreement we negotiated, including broad market 
access, special import protections, and rights to enforce 
China's commitments through WTO dispute settlement. All WTO 
members, including ourselves, pledge to give one another 
permanent NTR to enjoy the benefits available in one another's 
markets. To refuse to grant permanent NTR, therefore, would 
enable our trade competitors throughout the world to reap these 
benefits; but American farmers and businesses would be left 
behind.

                         Taiwan's WTO Accession

    Finally, China's entry will facilitate Taiwan's entry into 
the WTO. This will have substantial trade benefits, as Taiwan 
is already a larger export market for us than China. And the 
opening of both economies, while we have no guarantees, may 
ultimately play some part in easing the tensions in the Strait. 
It should thus be no surprise that Taiwan's new leadership 
supports both China's WTO membership and normalized trade 
between China and the United States.

          III. WTO Accession, PNTR, and Broader U.S. Interests

    Let me now turn from the specific trade policy changes 
China's WTO accession and PNTR will make, to their implications 
for issues separate from trade, but central to the broader US--
China relationship.
    U.S. trade policy, ever since the Second World War, has 
been one element in a larger response, conceived under Franklin 
Roosevelt and developed into concrete policies and institutions 
under President Truman, to the lessons of the Depression and 
the Second World War. These included collective security, 
reflected by the United Nations, NATO, the Rio Treaty and our 
alliances with the Pacific democracies; commitment to human 
rights, embodied by the Universal Declaration on Human Rights 
and then a series of more recent Conventions; and the fostering 
of open markets and economic stability, with the creation of 
the IMF and World Bank on the one hand, and the GATT on the 
other.
    Each element in this set of policies and institutions, over 
the years, has had its own intrinsic benefit, but also helped 
to support and strengthen the others. And this will also be 
true with China's WTO accession and permanent NTR.

                    Human Rights and the Rule of Law

    With respect to reform within China, WTO accession 
represents a potentially profound and historic shift, building 
upon but going much further than China's domestic reforms to 
date.
    China's domestic reforms have reversed the most damaging 
policies of the Cultural Revolution and Great Leap Forward. WTO 
accession will accelerate and deepen this process, altering 
policies which date to the earliest years of the communist era. 
As it enters the WTO, China will:
    --Permit foreigners and all Chinese businesses to import 
most goods into China;
    --Reduce, and in some cases remove entirely, state control 
over internal distribution of goods and the provision of 
services;
    --Enable foreign businesses to participate in information 
industries such as telecommunications including the Internet; 
and
    --Subject its decisions in all areas covered by the WTO to 
enforcement, including through formal dispute settlement when 
necessary.
    These commitments are a remarkable victory for economic 
reformers in China. They will give China's people more access 
to information, and weaken the ability of hardliners in 
government to isolate China's public from outside influences 
and ideas. More deeply, they reflect a judgment that 
prosperity, security and international respect will not come 
from the static nationalism, state power and state control over 
the economy China adopted after the war, but that China's own 
interests are best served by the advancing economic freedom, 
engagement with the world, and ultimately development of the 
rule of law inherent in the initiative President Truman began 
in 1948 with the founding of the GATT.
    The WTO accession, therefore, has potential beyond 
economics and trade: as a means to advance the rule of law in 
China, and a precedent for willingness to accept international 
standards of behavior in other fields. That is why many Hong 
Kong and Chinese activists for democracy and human rights--
Martin Lee, the leader of Hong Kong's Democratic Party who 
visited Washington this week to restate his support for PNTR; 
Bao Tong, the reformer jailed for seven years after Tiananmen 
Square, whose appeal to the UN Human Rights Commission last 
month drew worldwide sympathy--support PNTR and see WTO 
accession as China's most important step toward reform in 
twenty years. And it is why our support for WTO accession rests 
on a broader long-term commitment to human rights and freedoms, 
as well as new opportunities and strengthened guarantees of 
fairness for Americans.

              WTO Accession and American National Security

    Perhaps still more important, the PNTR decision is a test 
of our ability to develop the type of stable, mutually 
beneficial relationship with China that will be critical to 
peace and stability in the Pacific region in the years to come.
    Our relationship with China remains marked by substantial 
disagreements. When we disagree with China, to quote Theodore 
Roosevelt, speaking about the Open Door Policy to China in the 
first years of the 20th century:
    ``We must insist firmly on our rights; and China must 
beware of persisting in a course of conduct to which we cannot 
honorably submit. But we in our turn must recognize our duties 
exactly as we insist upon our rights.''
    In this spirit, we recognize how important a stable and 
peaceful relationship with China is--for the Chinese, for the 
world, and for America--and how fundamental is our 
responsibility to act upon areas of shared interest and 
benefit. We saw this responsibility clearly in the Asian 
financial crisis. We see it in the environmental problems of 
the Asia-Pacific; and for nearly three decades, we have seen it 
in trade.
    Neither this WTO accession agreement, nor any trade 
agreement will ever solve all our differences. However, the WTO 
accession, together with PNTR, will address a number of them; 
and moreover, it will do so through a set of one-way 
concessions by China. I believe that if we turn down a 
comprehensive set of one-way concessions, we make a very dark 
statement about the future possibility of a stable, mutually 
beneficial relationship with the world's largest country.
    Such a statement would threaten our work on all the 
specific issues in our China policy agenda today--from non-
proliferation and arms control, to reducing tensions in Korea 
and South Asia. It would complicate for the foreseeable future 
our existing Pacific alliances, as all of our Asian friends and 
allies would view rejection of PNTR as an unnecessary rejection 
of stable and constructive relations with their largest 
neighbor; and a turn away from the open, confident vision we 
have held for the Pacific over the years.
    Over the long term, and perhaps most important, China--
seeing no economic reason for our decision--would become more 
likely to read hostile intent into our every move; and this in 
turn would raise the prospect that our present disagreements 
and tensions will escalate into a broader confrontation of 
great consequence for every Pacific nation and for ourselves.

                               Conclusion

    That is the ultimate and most significant point at stake in 
Congress' decision next month. To reject PNTR would be to 
severely damage American trade interests; to set back the cause 
of reform in China; and to risk, without cause, a fundamental 
deterioration in our relationship with the world's largest 
country.
    But if we have the wisdom and confidence to make the right 
choice, the WTO accession and PNTR offer us a remarkable 
opportunity.
    Over three decades, trade policy has strengthened China's 
stake in prosperity and stability throughout Asia. Together 
with our Pacific alliances and military commitments; in tandem 
with our advocacy of human rights; and in the best tradition of 
postwar American leadership; it has helped us build a 
relationship with the world's largest nation which strengthens 
guarantees of peace and security for us and for the world. And 
WTO accession, together with permanent Normal Trade Relations, 
will be the most significant step in this process in many 
years.
    That is the opportunity before us. These are the stakes in 
this debate. And that is why this Administration--together with 
every living former Secretary of State; 47 State and 
Territorial Governors; all former U.S. Trade Representatives 
and Secretaries of Commerce, Agriculture, and the Treasury; and 
four former Presidents of both parties--is committed to 
permanent NTR on the basis of this historic agreement.
    Thank you very much.
      

                                


    Chairman Archer. My compliments to each of you for 
outstanding presentations. And I think each of you complemented 
the others in your presentation.
    Ms. Barshefsky, I think you did an outstanding job in 
negotiating this agreement with China. Outstanding. The 
accomplishments, the concessions that you were able to obtain 
far exceeded what anyone would have expected when you began the 
negotiations. And I understand that even recently, you have 
added an additional item, even beyond what was agreed to, which 
will help us to have entry for our fertilizer products. Is that 
correct?
    Ambassador Barshefsky. Yes, that is, Mr. Chairman.
    Chairman Archer. And I just think it's an outstanding piece 
of work. We cannot say often enough what you said, and which 
the American people I don't think fully understand. Number one, 
China will enter the WTO without any vote of the Congress of 
the United States. There is no provision in the law for the 
Congress to vote to keep China out of the WTO. That is not an 
issue here.
    Many still seem to believe that is the case. And 
unfortunately, some of the print media even stated earlier on 
that we would vote on it. We will not. And that needs to be 
understood.
    Number two, as you adequately pointed out, we gave up 
nothing in these negotiations. This was not like NAFTA, where 
we gave up things to get something. We gave up nothing as far 
as entry of goods and services into the United States.
    But if we do not approve permanent normal trading relations 
with China under the rules of the WTO, the rest of the world 
will get the benefit of the marvelous concessions that you were 
able to negotiate and we will not. How can that possibly help 
the United States of America?
    China is a country of approaching 1.3 billion people. They 
will not be ignored in the global market place. The rest of the 
world will be involved with China. We must decide whether we 
are going to also be involved. And I think that's exceedingly 
important.
    We can stipulate to the fact that the human rights policies 
of China do not measure up to the standards that we wish. We 
can agree with my colleague, Frank Wolf, that yes, they should 
be improved. But how does severing our relations with China 
help us in that regard? No one has ever answered that. Those 
who oppose permanent NTR for China never answer the question, 
will we be better off, or will we be better off if we continue 
to have economic involvement with China and benefit from all of 
the things that Secretary Glickman mentioned that he saw in his 
trip over to China.
    And it is clear to me that we will be better off in 
achieving those goals if we have trading relations with China. 
And then furthermore, what has not been mentioned in your 
testimony but needs to be said, we in my opinion need to build 
better bridges of cooperation with this massive country. It is 
in our very best interests.
    And the gentleman who played a major role in negotiating 
with you on this agreement, Zho Rongji, will likely be deposed 
if we vote down this agreement. And he is one of the reformers, 
one of the people that wants to push China in the direction 
that we would like to see China to go. It will play into the 
hands of the hard liners in China, which certainly is not in 
the best interests of achieving the goals of those who are 
striving to get better human rights policies in China. And this 
just needs to be said over and over and over again.
    Secretary Summers, as an outstanding economist, which I 
think anybody graduating from Harvard is considered to be, in 
your opinion, what would be the effect on the U.S.'s current 
prosperity and future competitiveness of our firms and workers 
in the world markets if Congress were to deny permanent NTR to 
China? What impact would that have?
    Secretary Summers. Mr. Chairman, I think you've stated the 
core of the case extremely well in the statement that you made. 
We would be a less prosperous country, with more risk of an end 
to our expansion, if we were not support the open trade policy 
in its next step, which is China's participation in the WTO.
    First, we would be less prosperous because of the export 
opportunities that we would lose at a time of substantial 
current account deficit--opportunities we would lose by putting 
U.S. producers at a major competitive disadvantage relative to 
producers from other countries in one of the world's largest 
and most rapidly growing markets.
    Second, we would be less prosperous due to our reduced 
capacity to address surges of product from China through 
multilateral mechanisms. And third, we would be less properous 
because of what denying PNTR to China would represent for the 
broad project of supporting open markets around the world, 
which in my judgment has been so central to our economic 
success over the last seven years.
    Open markets have been the safety valve in our high 
pressure economy that has enabled us to attain 4 percent 
unemployment with price stability and rapid real wage growth. 
Signs that we were moving away from an open market strategy 
would affect the credibility of our policy broadly and in my 
judgment, would adversely affect the prospects for stable 
growth in the future.
    Chairman Archer. Thank you. Each of you has managed large 
aspects of the U.S. relations with China. In your opinion, has 
the annual renewal of NTR with China, a process that has been 
pursued by the Congress for the last 10 years, increased or 
decreased the leverage of the U.S. with respect to changing the 
Chinese behavior?
    Secretary Glickman. In the case of agriculture, I don't 
think it's been a positive impact. That is, it's not allowed us 
to establish long term rules of engagement, which agriculture 
needs in order to build markets.
    Secretary Daley. I would just add, I think, Mr. Chairman, 
if you look at the debate year after year after year, now 20 
years, the margin of it passing seems to grow. And the debate 
seems to be diminished around it. So any leverage seems to be 
inconsequential, and that is why it's so important to get to a 
permanent status, so that those markets are open. Having an 
annual process has not opened that market to the degree that we 
have wanted, and obviously nowhere near the degree the 
opportunities presented by the deal that Ambassador Barshefsky 
negotiated.
    Ambassador Barshefsky. If I might say, Mr. Chairman, I 
agree with what's been said. I think there are two reasons 
annual NTR has not been leverage. First, it's in our interest 
that China get annual NTR, and that immediately removes its use 
as leverage to force China or any other country to do anything 
that would otherwise not want to do.
    To put it another way, it is not in our interest to sever 
the economic relationship with China. It's not in our interest 
to make an enemy of China. It's not in our interest were we to 
deny NTR for China, to destroy the economy of Hong Kong, which 
is exactly what would happen. It's not in our interest to 
isolate China. It's not in our interest to give a helping hand 
to the hard liners in China.
    It is certainly not in our interest to see an increase in 
tension in the Taiwan Strait because of our lack of engagement 
with China. NTR has been in our interest to give to China, so 
its use as leverage is by definition severely limited if not 
zero.
    Second, I believe annual NTR has not been leveraged with 
China because it doesn't really accomplish, I believe, what 
needs to be accomplished to see effective and sustained reform 
in China. Effective and sustained reform in China depends upon 
the Chinese. And it depends upon the creation in China of a 
critical mass of economic reform and reformers in China. 
Certainly buttressed by outside forces, but neither we nor any 
other country can do it for China.
    Annual NTR has been provided to China every year for over 
20 years without China having to do a thing. It has never 
catalyzed that development within China of a large body of 
internal reform, because they get it for free.
    Under this agreement and PNTR, the situation is entirely 
reversed. China must reform. It must open its market. It must 
begin to develop a rule of law. It must do these things in 
order to gain PNTR from the United States. And the cementing of 
a reformist element in China, which is what WTO accession will 
do, a cementing of a reformist element in China will provide 
far greater leverage than an annual process that has always 
been a foregone conclusion.
    Chairman Archer. Thank you. Mr. Summers?
    Secretary Summers. Very briefly, Mr. Chairman, I think the 
annual renewal process has had a reach that has exceeded its 
grasp. While it has sought to pursue important objectives, it 
has not been effective in meeting them. Indeed, it has been 
very poorly positioned. The Annual Renewal Process It has been 
just certain enough that it has afforded the United States very 
little leverage to advance our agenda, and just uncertain 
enough to exert a significant chill on trade activity and to 
serve as an intermittent irritant in the relationship between 
the United States and China.
    I believe the new course that this agreement would chart, 
based on pre-negotiated long-term commitments with China, based 
on the prospect of legitimate multilateral enforcement 
mechanisms, and based on reinforced approaches such as the 
Helsinki-Commission-type model that we discussed to further our 
non-trade interests, affords much the best prospect for 
achieving the objectives of the annual renewal process.
    I think it is very important to emphasize that the 
difficulties with the annual renewal process have, if you like, 
been tactical rather than strategic. It has been directed at 
appropriate objectives, but it has not been the best way to 
achieve those objectives. And it has sought those objectives 
with significant collateral costs.
    Chairman Archer. Thank you very much.
    Mr. Rangel.
    Mr. Rangel. Thank you.
    I invite this panel just to come to make our Chairman feel 
so good in seeing you on other issues that will be coming 
before the Committee. Ambassador Barshefsky, I really think he 
likes you. [Laughter.]
    Mr. Rangel. Which causes me to take another look at this 
whole thing. [Laughter.]
    Mr. Rangel. Could you tell me, I was very impressed, 
Secretary Glickman, with the economic gains that we can make in 
agriculture, in poultry and meats and all those other things. 
Have you got similar numbers as to what we could do if we were 
trading with Cuba in terms of rice and beans? Do you keep these 
figures at all?
    Secretary Glickman. The answer is no.
    Mr. Rangel. You don't.
    Secretary Glickman. No. We are aware of--
    Mr. Rangel. Don't we have some bill in the Senate where 
they said they wanted to sell chickens and grain and somehow we 
got some money for them and they dropped the bill? How did that 
work?
    Secretary Glickman. I'm not sure.
    Mr. Rangel. Were you familiar with the legislation?
    Secretary Glickman. Generally familiar with the 
legislation. I am aware that the Cuban market has been entered 
into quite aggressively by a lot of our trading competitors, 
including the Canadians and the Europeans. And I'm sure that 
our Foreign Agriculture Service does keep some general 
statistics on their production.
    Mr. Rangel. Could you get that for me?
    Secretary Glickman. Yes, I'd be glad to.
    Mr. Rangel. The people in Louisiana and Arkansas, they just 
beat at my door in terms of the rice that could go over there, 
bean people and all that.
    Secretary Glickman. Sure.
    Mr. Rangel. I am very impressed with my Chairman and all of 
you that this engagement, if we want to move these countries 
toward democracy, you just can't stand outside and yell at them 
and not engage and not work with them. And that democracy and 
certainly trade policy should be a showcase to show that we're 
right, we don't just wave the constitution, we show that it 
works.
    Why does this argument not work with Cuba? I mean, why 
can't we beat down Castro and Communism and their failure to 
move toward democracy by showing them how the free open 
marketplace works, and engage them? There are a few communists, 
too, you know, it's not just 1.3 billion.
    Secretary Daley. I think, Congressman, that as a principle, 
you're absolutely right. Obviously, there have been 
intermediate acts that have caused the Congress and presidents 
in the past to go a different course. I think as a principle, 
we all four would strongly believe that opening markets and 
opening countries, especially communist countries, will bring 
about reform and change.
    But there have been certain actions by the Cuban government 
that have caused the Congress to react, and other 
administrations to act, that have blocked that principle from 
being implemented.
    Mr. Rangel. So all of you would agree that the principles 
of engagement do far more in moving a country toward democratic 
principles than isolating them? As a general principle, this 
should apply to Cuba. And if it was not for, lack of a better 
word, political reasons, these same principles would apply 
here.
    You said acts of Congress, and we acted politically. So. 
[Laughter.]
    Secretary Daley. We are required to follow the law. We 
follow the Burton law. And the fact of the matter is, the 
actions taken that moved Congress to pass that were rather 
serious actions.
    Mr. Rangel. Yes, but by doing this, we have not moved Cuba 
toward democracy any further. So it hasn't helped us. We're 
just, you know, it hasn't helped at all. You're obeying the 
law, but it hasn't helped us move Cuba toward democracy at all 
by isolating them.
    Secretary Daley. I think we would agree that Cuba has not 
moved toward democracy.
    Mr. Rangel. Okay. Let's talk about, I agree that this 
annual voting and not making permanent normal trade 
relationship with China, I don't see what positive thing comes 
out of this. If we're not happy with them, we still are going 
to vote for trade, and reviewing it annually, I don't see where 
that gets us any closer to the objectives that we all want in 
terms of having, moving toward a standard that we can 
appreciate as it deals with human rights.
    But I think we all agree that the timing of this and the 
Congress, everyone was always concerned not only just with the 
legislative calendar, but with the political calendar as well. 
And I don't think we would be honest if we didn't recognize 
that the closer this gets to the election, the more difficult 
it is to get an accurate count.
    Now, if one were to assume that the Chinese could get into 
the World Trade Organization without us, and would, and if they 
would further assume that Ambassador Barshefsky has reached an 
agreement that both sides believe is beneficial to the United 
States as well as the People's Republic of China, if we did not 
make it permanent, which it does not dramatically do, so they 
why do we assume that Congress would not make it permanent? And 
why do we assume that if we don't do it now, that we can't do 
it in April of next year? What do we lose? What happens? China 
walks away from the WTO?
    Ambassador Barshefsky. Mr. Chairman, I can't imagine a 
worse result than the Congress denying PNTR, either by voting 
it down or by having the Administration withdraw its bill on 
the promise that it would vote at some other time. China--
    Mr. Rangel. I'm not saying withdraw it. There was a time we 
thought that we had to wait until Chinese completed their 
negotiation with the European Union. And now we understand that 
even though they have not done it, it's not important, that 
we're going to do what we have to do.
    But suppose we just didn't do anything? Suppose it just 
didn't come in time? Suppose you didn't have the votes? What 
would happen? What's the downside?
    Ambassador Barshefsky. Well, as you point out, China will 
join the WTO this year. It would be legally required under 
international rules to give the benefits of the concessions to 
all countries that provided PNTR. We are the only country in 
the world, in the world, that does not now already provide 
China with PNTR.
    Mr. Rangel. We're the only country that denies normal 
relationship with Cuba. That doesn't bother us. Why would China 
retaliate if they believed that they entered into a great 
agreement with you, and we all agree that it was a good 
agreement for us, what would they gain by saying that they're 
going to make us pay politically, for what we've done 
politically to them? Because I would agree with you that it 
would be an affront to the dignity of the People's Republic of 
China.
    But what would they benefit by denying us access to their 
market when they've got a good agreement, when they do have 
approval by the Congress of trade relationship? What we have 
not done, in the hypothetical, would be, not to make it 
permanent.
    Ambassador Barshefsky. Why on earth would China in effect 
reward the United States by giving it the benefits of the deal 
to which the U.S. would not be legally entitled on the basis 
that we did not give them permanent NTR?
    Mr. Rangel. Why would we call it a reward? This is a trade 
agreement. And even though we have access to their markets, why 
would they, who really consider themselves a developing 
country, why would they just say politically, you have denied 
us permanent tarde relationship, and so therefore, your 
countries will not have access to our market? Would that be the 
wise political thing for them to do, when a Congress is going 
to be around next year?
    Ambassador Barshefsky. I believe that is absolutely the 
likeliest outcome.
    Mr. Rangel. And what damage do you think would happen? I 
mean, if this would happen, then American businesses, the sky 
would fall, and then they would come back next year and say, we 
would have to do this immediately. It would be an international 
crisis to allow China to go into the U.N. where we didn't 
normalize trade relationship. And if this is the end of your 
deal? I mean, if it's not done in May, it's not going to be 
done at all?
    Secretary Summers. Can I add something? I think there are 
three reasons why it's important to approve PNTR for China. One 
is, I think we are taking a risk of a very difficult situation 
that would put U.S. producers at a competitive disadvantage in 
China. Nobody can say with certainty what would happen. But 
we're taking an unnecessary risk by not doing it quickly.
    Second, we're taking a risk with respect to other 
countries' capacity and willingness to negotiate with the 
United States in the future. If we demonstrate to them that 
agreements that are reached by the Executive Branch, that are 
seen very widely as very strong and good agreements, take 
periods of several years to win approval and to go into 
effect--
    Mr. Rangel. You mean like Fast Track.
    Secretary Summers. And third, if we do not move ahead, we 
are taking a risk, in my judgment of calling into question the 
American commitment to an open global trading system. I believe 
that over time that, too, would have very serious consequences 
for the global economy.
    I think that because this is an actual agreement that has 
been negotiated at the highest level with officials of a major 
country who in many ways have staked their careers on it, we're 
looking at a very different kind of situation than the 
situation with Fast Track.
    Secretary Daley. Congressman, could I just add, just to 
reiterate what Secretary Summers said, I do strongly believe 
our business community would be seriously disadvantaged. The 
opportunities presented for their competitors from Europe and 
other parts of the world would be enormous. Their credibility 
would be in question.
    And obviously, there would be no guarantee over the next 
year when their competitors would be moving in very 
aggressively into that market that Congress would be passing it 
next year. So I think it would add a certain uncertainty into 
their opportunities that would be enormous and would be 
probably a long term negative for them.
    Mr. Rangel. Thank you, Mr. Chairman.
    Chairman Archer. Mr. Crane.
    Mr. Crane. Thank you, Mr. Chairman. I'll be brief. I want 
to first of all congratulate the Energizer Bunny, having 
watched her perform in Singapore, negotiating the information 
technology agreement, which was like 24 hours a day of hard 
work. And then watching her performance with Zhu Rongji when he 
was over here. And again, the endless negotiations and the very 
significant progress made.
    Then her similar type of labor out in Seattle. We cannot 
pay you tribute enough, Madam Ambassador. You do a superb job 
and we're very proud of you.
    One quick question, and that is an update on Europe's 
bilateral negotiations with China. What is the status of that?
    Ambassador Barshefsky. The Europeans and Chinese will re-
engage May 15. And I would expect, if they don't conclude, at a 
minimum they'll make very substantial progress at that meeting.
    Mr. Crane. And then for all of you folks out there, what is 
your projection as to when the private sector in mainland China 
will overcome, in terms of the total business volume, overcome 
the state sector? What would be your projections? I mean, 
assuming that we get permanent NTR and we move down a positive 
path?
    Secretary Summers. Both trend lines are working in the 
right direction for that, Mr. Crane. The private sector's going 
up and frankly the public sector enterprises are having a lot 
of trouble. I think there are a variety of questions and 
definitions. But I would expect it to happen some time within 
the coming decade.
    Secretary Glickman. I would just mention that the Chinese 
have agreed to eliminate the state trading enterprises when the 
Canadians have not, when in some cases the Australians have 
not, when in some cases the Europeans have not. So we have 
``democratic'' countries out there, free market economies, that 
are going to be behind the Chinese effort. Of course, we have 
to make sure that they're properly enforced.
    Mr. Crane. Bill?
    Secretary Daley. I would just, I don't think we could 
estimate. But I had the pleasure when I was in Beijing last 
month of meeting with a number of the heads of the state owned 
companies. They are number one obviously very concerned about 
the competition that is coming after they enter the WTO. And 
they are very committed to making the sort of changes, but 
cautious, because they know the changes that they need to do, 
whether it's a power, energy company that has a million 
employees, but isn't going to be very competitive when other 
companies come in.
    I believe they are committed, I believe this process that 
we're moving forward with will definitely move this much faster 
than if they weren't to enter the WTO or we were not to grant 
them PNTR.
    Mr. Crane. And Charlene, do you have an estimate?
    Ambassador Barshefsky. No, I think it's been covered.
    Mr. Crane. Do you agree with them?
    Ambassador Barshefsky. Yes.
    Mr. Crane. Well, I commend all of you. Keep the faith, 
fight the good fight, and we shall prevail. And thank you.
    I yield back the balance of my time, Mr. Chairman.
    Chairman Archer. We are going to have to break for this 
vote within five minutes. And the Chair would inquire as to 
whether any of you can come back after, and we'll also break 
for lunch and will not return until 1:30. Is it possible for 
any of you to come back at 1:30? If not, we will understand.
    [Witnesses reply in the negative.]
    Chairman Archer. All right, well, we'll try to use the next 
five minutes as productively as possible. Ms. Johnson.
    Mrs. Johnson. Thank you. Very briefly, so other people will 
have a chance, I'd like you to describe, Ambassador Barshefsky, 
more specifically the benefits of the surge protection that 
you've negotiated. It is my understanding that NAFTA doesn't 
have this surge protection, that the old GATT agreements, the 
WTO, that we have never had the ability that this agreement is 
going to give us to just manage big changes in imports.
    And since it's those big, sudden rises in imports that have 
cost jobs and imposed hardship on American communities, I'd 
like you to describe more specifically the surge protection 
provisions of your agreement.
    Ambassador Barshefsky. You're quite right in pointing out 
that such a provision doesn't exist in any other agreement with 
respect to any other country. Nor does it exist in U.S. trade 
law.
    This is a provision designed to ensure that if imports from 
China surge into the U.S. and cause market disruption in the 
U.S., we can for a period between two and three years, 
depending on the type of action, move to curb or restrict 
imports in that product sector.
    Mrs. Johnson. Now, this is similar to the way the voluntary 
restraint agreements worked--
    Ambassador Barshefsky. It is, indeed.
    Mrs. Johnson.--in the 1980s, to allow the machine tool 
industry to get back on its feet.
    Ambassador Barshefsky. Correct. It is quite similar in 
intent. It will be somewhat different procedurally in 
implementation. But it is quite similar in intent and in 
design.
    Mrs. Johnson. I would also like to point out that had we 
had this protection, the American bearing industry would be 
much stronger today than it is, because it would have had a 
more sensitive tool--
    Ambassador Barshefsky. That's exactly right.
    Mrs. Johnson.--as opposed to the anti-dumping laws, to deal 
with the import of bearings from China.
    Ambassador Barshefsky. And had this been in effect during 
the recent steel upsurge in the fourth quarter of 1997 and 
during 1998, including from China, our steel industry would 
have been much better positioned.
    Mrs. Johnson. Thank you.
    Chairman Archer. The Chair regrets that our time has run 
out.
    Mr. Cardin. Mr. Chairman, could I just inquire? I wanted to 
get onto the record something similar to this as it relates to 
Section 201, the point that Mrs. Johnson raised. If I could 
just at least put it on the record, I'd be glad to have the 
answer in writing.
    But it seems to me that the additional protections that are 
in there in regards to China, as you point out, would have 
helped us in China's deal, would have done nothing as regards 
Venezuela or South Korea or Brazil. My question I guess is, is 
there anything in the WTO that prevents us from using this 
standard in our trade laws in regard to dumped steel or dumped 
products in the United States? Could we modify our law to do 
this, and therefore we would have had the protections that you 
so well negotiated for China in regard to these other 
countries?
    Ambassador Barshefsky. No. Under WTO rules, import surge 
mechanisms can't be country specific. And under WTO rules, the 
standard of proof is different from this anti-surge mechanism.
    Mr. Cardin. You misunderstood my question. My question is, 
couldn't we amend our laws generally in this area? I don't mean 
country specific.
    Ambassador Barshefsky. Congress can do anything it wishes.
    Mr. Cardin. The point is, you said that if this was in 
effect when the steel was imported into the United States--
    Ambassador Barshefsky. From China.
    Mr. Cardin.--we would have been protected. But there was 
more than just China involved in the surge of steel in the 
United States last year. We had steel coming in from Brazil, 
Venezuela, from South Korea that the Administration determined 
was inappropriate.
    Chairman Archer. Because we do not have adequate time to 
make this vote, the Chair reluctantly has to terminate this 
session this morning, and would suggest that members who have 
questions continue their colloquies personally with either the 
USTR or any of the other departments that are involved. And I'm 
very sorry, but we're going to miss this vote if we do not 
recess the Committee now.
    And the Committee will be recessed until 1:30. Thank you 
very, very much.
    [Recess.]
    [A question by submitted by Mr. Sam Johnson, and Secretary 
Daley's response follow:]

    Q. Do you have a view on the wisdom of U.S. companies 
continuing to invest in Chinese infrastructure projects given 
the recent experience of Panda Energy?
    A. Staff from the Departments of Commerce and State in 
Beijing and Washington, D.C. are very familiar with the Panda 
Energy International power plant project in Hebei Province, and 
have provided strong support on Panda's behalf. We have made 
representations at the central and provincial levels, which 
helped Panda secure a higher electricity tariff rate than 
presently enjoyed by many Chinese domestic firms. We also are 
working diligently to help Panda executives secure a long 
sought after meeting with senior officials of the Chinese 
Embassy in Washington. While an appointment has not been 
confirmed (the Deputy Chief of Mission (DCM) is on home leave 
until mid-June), Embassy officials seemed certain the DCM would 
meet with Panda upon his return.
    In light of Panda Energy's decision to split its investment 
into multiple joint ventures that fell below the threshold 
required for central government approvals, we believe the most 
effective representations are with provincial officials and 
will continue to seek resolution through appropriate Hebei 
authorities. We have contacted Commercial Service staff in 
Beijing and urged them to redouble their efforts with 
provincial authorities to see that the Tangshan Panda power 
plant issues are resolved. In addition, we have strongly urged 
Panda to initiate immediate legal proceedings open to them 
under applicable Chinese industrial and electrical law.
      

                                


    Chairman Archer. Our next panel will be the former 
Secretary of the Treasury, the Honorable Robert Rubin, who has 
now left the Government to go on to other pastures, which I 
hope are greener. And we're delighted to have you back on this 
very, very important issue of what we do with trade with China. 
And I'm sure that we will benefit from your experiences while 
you were Secretary of the Treasury, and by your experiences 
since you've left the Secretary of the Treasury.
    And welcome to the Committee. You're no stranger to this 
Committee room, you've been here many times. And so you should 
be very comfortable, and we're delighted to have you today, and 
we welcome your testimony, and you may proceed. Without 
objection, your entire written statement will be included in 
the record, and you can tell us verbally whatever you wish.

 STATEMENT OF HON. ROBERT E. RUBIN, SENIOR OFFICER, CITIGROUP, 
INC., NEW YORK, NEW YORK, AND MEMBER, BOARD OF DIRECTORS, FORD 
  MOTOR CORPORATION (FORMER SECRETARY, U.S. DEPARTMENT OF THE 
                           TREASURY)

    Mr. Rubin. Mr. Chairman, thank you. I thought for a moment 
you were going to say I could deliver my entire written 
statement, which would run about an hour or so and I'm sure 
would be very interesting. [Laughter.]
    In any event, thank you very much, and I am delighted to be 
here, Mr. Chairman. As you said, I've been here many times 
before. But I think probably never on an issue that struck me 
as important as I think this issue is. I particularly welcome 
the opportunity to be here, because I do think that this 
question is of central importance to our economy.
    Let me acknowledge at the outset, Mr. Chairman, that I am 
an officer of CitiGroup, Inc., and also on the board of the 
Ford Motor Company, both of which I would guess would benefit, 
as I think the whole American economy will benefit, from China 
accession to WTO. But the views that I express are totally and 
solely my own personal opinions and not on behalf of anybody 
else.
    I think, Mr. Chairman, that trade liberalization has been 
central to our economic growth over the past seven years. And I 
do believe that approval of permanent normal trade relations is 
an enormously important, and I would say critical, next step 
for Congress to take to keep our country on a successful 
economic course. And I believe the decision to reject PNTR 
could be a major reversal for our country's economic future. 
And that again is why I was very pleased to be asked to come 
and speak to you today.
    Most specifically, I believe that you all should support 
WTO accession for four reasons. First, as you know, this 
agreement vastly expands our access to Chinese markets. They're 
already large. They'll be the largest markets in the world some 
time in the first half of the next century, I would guess.
    Secondly, support for this agreement could be critical in 
providing momentum for continued movement forward on trade 
liberalization, and is a particularly important time to move 
forward in this area, since there is debate around the world 
whether trade liberalization should move forward or backward.
    Thirdly, this approach offers the best prospect for 
advancing the broad range of American policy aims with respect 
to China, human rights, the labor rights, environmental 
standards, national security. And finally, I spent a fair bit 
of time in China, Mr. Chairman. I don't think there's any 
question that the forces for reform and the figures in the 
political system in China who are advocating reform would be 
very much reinforced by passage of PNTR and that conversely, 
the failure to pass PNTR would be a substantial setback to 
these forces of reform.
    Since 1994, about 20 percent of American growth has been 
linked to the export sector. Exports now support about 12 
million jobs. Average pay is about 20 percent above national 
average. The number of small businesses involved in the export 
industry has increased by about 100 percent over the last five 
years.
    Moreover, Mr. Chairman, the other side of the trade 
equation, imports, contribute very substantially to our 
economic well-being, although it's not politically popular to 
say that. Imports lower consumer prices, they increase 
competition, they increase efficiency, increase 
competitiveness. And in my opinion, our open markets have been 
very centrally important in the good economic conditions of the 
past recent years.
    Having said that, I do believe that as we proceed with 
trade liberalization, and as we keep our own markets open, we 
also have to have programs to deal with those who are 
dislocated or adversely affected by trade. And I know that's a 
subject that's been considered in this Committee.
    What we should not do is to opt for protectionism or other 
impediments to change, which would reduce economic progress 
and, which would reduce the overall economic well-being of the 
American people, and could even lead to stagnation.
    As to access to the Chinese market, imports from China will 
continue to come into this country without regard to what you 
do on PNTR. What's at stake here is our ability to export to 
China. And this agreement, as you know, greatly reduces tariffs 
and even more importantly in my judgment, increases non-tariff 
barriers to American exports. Every single market access 
concession in this agreement was made by China. None were made 
by the United States.
    A vote against this bill would also be a vote, in effect, 
to reduce the interactions of Americans with Chinese through 
the medium of trade and in my view would be a vote to reduce 
the flow of practices, of our ideas and our ideals in Chinese 
society, and therefore, would cut against promotion of human 
rights, environmental rights and of labor rights. I know that 
Congressman Levin has made some proposals with respect to 
parallel legislation not tied to PNTR. And I think those 
certainly are worthy of very serious consideration by this 
Committee.
    Finally, Mr. Chairman, I said a moment ago, have known 
leadership in China, and I think that those who advocate reform 
would be severely, or could be at least severely undermined in 
their efforts if our country were to turn its back on China by 
rejecting PNTR.
    In my view, to conclude, this is a vote on a question that 
is central to our country's economic future. We have benefitted 
enormously from trade liberalization of the past 20 years. We 
will benefit enormously if this trade liberalization continues 
and we will be adversely affected, and I think also very 
substantially, if the global trading system fails to move 
forward or even worse, move backwards.
    I believe that for years to come, the future of our 
economy, and to a very large extent, of the global economy, 
will be affected by what you do here in Congress in the next 
few weeks. If we do the right thing, the United States will 
exercise its leadership role in a way that's good for our 
economy, that is good for China, and it is good with respect to 
further our national security interests and democratic ideals 
in China and throughout the world. And that conversely, a 
setback could have severe negative implications for our 
economy, the Chinese people and all our interests and concerns 
with respect to China.
    Mr. Chairman, I thank you.
    [The prepared statement follows:]

Statement of the Hon. Robert E. Rubin, Senior Officer, Citigroup, Inc., 
New York, New York, and Member, Board of Directors, Ford Motor 
Corporation (former Secretary, U.S. Department of the Treasury)

    Good morning Mr. Chairman, Congressman Rangel, Subcommittee 
Chairman Crane, Congressman Levin and members of the Committee, 
and thank you for inviting me to be here today. This is the 
first time I have come back to Capitol Hill to testify since I 
left my position as Secretary of the Treasury, and I chose this 
opportunity because of my belief that the question before you 
is of central importance to the future of the U.S. economy.
    At the outset, Mr. Chairman, I want to acknowledge that I 
serve as a senior officer of the Citigroup, Inc., and a member 
of the Board of Directors of the Ford Motor Corporation, both 
of which, I suspect, will benefit from China's accession to the 
World Trade Organization (WTO). I also want to make it clear 
that my testimony today is on my own behalf, and not on behalf 
of any other organization or entity with which I may be 
affiliated. These are my own personal views.
    I am here today because I believe that trade liberalization 
and economic engagement have been central to America's economic 
growth over the past seven years, and that approval of 
Permanent Normal Trade Relations (PNTR) is the next major step 
the Congress should take to keep our country on this successful 
economic course. Our embrace of technological change and trade 
liberalization have made the U.S. the most competitive, dynamic 
economy in the world: supporting PNTR status for China is the 
best way to continue on that path. By contrast, a decision by 
Congress to reject PNTR could have substantial adverse impact 
on our nation's economic prospects in the years and decades 
ahead, and would reverse trade liberalization and the exercise 
of American leadership on international economic issues, which 
have contributed so much to our strong job growth, rising 
wages, and increased prosperity.
    As I will explain in more detail today, I believe that it 
is in America's interest to support China's accession to the 
WTO for four reasons. First, this agreement vastly expands our 
access to China's market, which will soon be the largest 
economy in the world. Second, support for this agreement would 
signal continued U.S. commitment to trade liberalization that 
has been an indispensable element of our nation's success in 
this era of technological change and globalization. It is 
especially important--at a time of increasing debate in our 
nation and around the world about the course of global trade 
liberalization--for us to take this bold step forward.
    Third, this approach offers the best prospect for advancing 
other U.S. policy aims toward China, such as promoting human 
rights, labor rights, and environmental standards. Finally, 
this approach will reinforce the forces of economic reform in 
China and thereby increase the likelihood that that nation will 
move toward a market-based economy in the years to come.
    To summarize, support for China's membership in the WTO is 
the right thing for America, the right thing for our economy -
and, I should add, the right thing for us to do as the nation 
that has done the most to shape -and benefits the most from--a 
global trading system. Let me explain why I believe this to be 
so.

I. Global Trade And Open Markets Have Played A Central Role In 
U.S. Economic Expansion.

    Today we are experiencing a time of tremendous strength in 
the U.S. economy. Unemployment is near a 30-year low at 4.1 
percent and has remained under 6 percent for the last six 
years. The economy has generated more than 22 million new jobs 
over the last nine years, and inflation has plunged to near-
record lows.
    I was proud to serve in various capacities in the Clinton-
Gore administration during most of this period. Beginning in 
1993, we advanced a comprehensive economic strategy which had 
three key parts: (1) maintaining fiscal discipline, which has 
reversed decades of deficits, to create the first federal 
budget surplus in a generation; (2) making critical investments 
in the American people, in the strategic areas of education, 
training, research and development, among others, and; (3) the 
subject I am here to discuss today--expanding trade, with a 
focus on opening foreign markets for American goods and 
services.
    The third part of this strategy has its roots in policies 
adopted five decades ago, when the leaders of this country--
reeling from the wounds of the Great Depression and World War 
II--came to realize that we could no longer isolate ourselves 
from global trade if we hoped to enjoy long-term peace and 
prosperity. Beginning with the General Agreement on Tariffs and 
Trade (GATT) and more recently, the World Trade Organization 
(WTO), they began to tear down the protectionist barriers of 
the first half century and turn America into a leader of the 
movement for free and fair trade throughout the world. Since 
taking these bold steps, we have learned as a nation that 
opening up the world's markets for goods and services is a key 
element of our continued productivity and prosperity. As we 
watched the average tariff on industrial products in developed 
countries drop precipitously during that time--from 40 percent 
to under 4 percent--we have also experienced an unparalleled 
economic boom, thanks in large part to the growth of global 
trade.
    When I tell you that increased trade over the last several 
years has been critical to our nation's most recent economic 
success, I risk belaboring the obvious. But the centrality of 
trade to America's prosperity cannot be overstated. Over the 
last five years, the volume of U.S. exports has grown by 40 
percent, due, in large part, to lower foreign trade barriers, 
and since 1994, approximately one-fifth of U.S. economic growth 
has been linked to the dynamic export sector.
    The most obvious effect of increased trade on the U.S. 
economy is that exports create more and higher-wage jobs for 
Americans. Jobs supported by American exports grew by 1.4 
million between 1994 and 1998, with U.S. exports of goods and 
services now estimated to support 12 million domestic jobs. And 
when I say 12 million jobs, I am talking, by and large, about 
12 million higher-wage, higher-skilled jobs. Export-related 
jobs are concentrated in high-wage, high skill fields and help 
raise living standards for American families. Workers in jobs 
directly supported by goods exports receive wages that are 20 
percent higher than the national average.
    Exports also support one of the key elements of America's 
economy: small business. In 1997 (the most recent year for 
which such data is available), almost 210,000 U.S. companies 
exported goods, nearly double the 1992 total of 113,000. And 
ninety-seven percent of these companies were small or medium--
sized.
    A less widely recognized but equally important fact is that 
imports also contribute greatly to our well-being as a nation. 
It may not be politically popular to say this, but imports lead 
to lower consumer prices, greater productivity through 
increased competition, lower interest rates, and higher 
standards of living. According to a calculation based on 
leading econometric models, if increased imports had not been 
available to American consumers, U.S. inflation could have been 
one percentage point higher -and interest rates two percentage 
points higher--over the past three years. Thus, the benefits of 
increased imports are as real as the benefits of increased 
exports -and without those benefits, we would not have enjoyed 
the outstanding economic conditions of the past seven years.
    It is interesting to compare what has happened recently 
here in the U.S., with what we have seen in other 
industrialized nations with less open systems. U.S. tariffs are 
among the world's lowest, averaging only 2.8 percent, and the 
United States is the world's leading trader, accounting for 
about 14 percent of world exports and 16 percent of imports. 
While our economy has prospered--fueled in part by the most 
open market among the world's major economies--other countries 
that are far less open have seen their economies stagnate:
     Our nation, with relatively open markets, has seen 
unemployment drop to 4.1%, while European nations, with 
considerably less open markets, have suffered unemployment 
rates more than twice as high.
     In the last six years, the U.S. economy has grown 
at an average annual rate of just under 4 percent; at the same 
time, the economies in less open countries like Germany and 
Japan have grown much more slowly--at an average of 1.7 percent 
and 1.1 percent respectively.
     In addition, the U.S. has, for the past several 
years, been rated ``Number One'' on the World Competitiveness 
Scoreboard, ahead of France, Germany and Japan.
    Trade expansion, like the growth of technology, benefits 
the vast majority of Americans, but unavoidably has adverse 
impacts on others. Trade liberalization can increase 
dislocation, and prompts anxiety even among those who are doing 
well. The Clinton-Gore administration has advocated combining 
trade liberalization with an active domestic agenda--including 
education, training, and expanded health care coverage--a 
program that is designed to meet the real problems and 
anxieties created by trade liberalization that is, on balance, 
so beneficial. The objective of this combined agenda is both to 
better equip our people to prosper in a rapidly changing global 
economy, and to increase their confidence in their ability to 
do so.
    Of course, what has been done thus far in this respect--
record increases in training, a doubling of the federal 
education budget, passage of the Kennedy--Kassebaum 
legislation--is just a start, albeit an impressive one. Among 
the additional proposals the administration has offered is the 
creation of a new office that would craft and coordinate 
responses and recovery efforts for regions adversely affected 
by trade or economic distress, and a substantial increase to 
expand trade adjustment assistance for workers who lose their 
jobs due to imports and shifts in production.
    Most fundamentally, it would be a mistake to address the 
disruptions that trade causes by building protectionist walls 
around ourselves at the expense of America's future and the 
expense of countless working families who will see their 
paychecks cut if open trade is constrained. Moreover, while we 
have a responsibility as a nation to address concerns about job 
dislocation, responsible policy-makers must take care not to 
exaggerate its causes or effects. In fact, most of the 
dislocation we have experienced in recent years has been 
totally unrelated to any trade agreements. Between 1995 and 
1997 (latest data), for example, three-quarters of displaced 
workers in the U.S. were in jobs that are not import sensitive.
    In the end, the economic results yielded by the trade 
policies of the past seven years speak for themselves. Many of 
you sat in this room and listened to doomsday predictions of 
what would happen to American jobs if you voted for NAFTA. 
Since passage of NAFTA, however, the unemployment rate has 
fallen by 1.4 percent and is now hovering at a 30-year-low, and 
our economy has created 16 million more jobs. Inflation-
adjusted median household income has increased by approximately 
11.5 percent, reversing substantial declines in the previous 
four years. In the end, the dire predictions of NAFTA 
opponents--made during the debate over the agreement--never 
materialized. Instead, the years since NAFTA was approved have 
been years of unprecedented prosperity for our nation.

II. The China WTO Accession Agreement Holds Great Economic 
Promise For The U.S. And For American Workers.

    Later this month, you will have the opportunity to vote on 
legislation granting China PNTR status and thereby ensure that 
the U.S. can reap the benefits of China's WTO accession. This 
is the next step we must take as a nation to reap the benefits 
of open markets and sustain our economic strength into the 21st 
century. The WTO agreement follows in the tradition of this 
Administration's prior trade agreements by advancing the cause 
of global trade while providing safeguards against unfair and 
illegal trade practices. And like prior trade agreements, it 
holds great promise for our economic future.
    The potential benefits of the U.S.--China agreement to 
American companies and workers cannot be overstated. China is 
the largest nation in the world -and its economy is expected to 
maintain the strongest growth in Asia over the next several 
years with per capita GDP growth of 7 percent or more a year. 
Chinese imports will continue to come to America with or 
without PNTR legislation: what is at stake here is our ability 
to export to China, and how quickly that promising economic 
opportunity can be realized.
    Already, China is America's fourth largest trading partner. 
Despite the existence of significant Chinese barriers to trade, 
U.S. exports to China totaled $13.1 billion in 1999, making 
China the 12th largest market for U.S. goods. The China--U.S. 
agreement will slash tariffs and eliminate other non-tariff 
barriers that have strangled the efforts of American companies 
to expand their presence in China. All told, China's WTO 
accession is expected to nearly double U.S. exports to China 
over the next five years, increasing those exports by $13 
billion.
    The PNTR bill has been painted by some opponents as harmful 
economic legislation that will threaten American jobs. But 
these characterizations could not be farther from the truth. If 
I were to summarize all of my testimony into one sentence, this 
would be it: The WTO agreement offers our country an incredible 
opportunity because every single market access concession was 
made by China--not by the United States -and therefore, the 
U.S. economy, U.S. jobs, and U.S. businesses will all benefit 
from this agreement, hands down. Ambassador Barshefsky's 
talented team of negotiators is truly to be commended for this 
achievement.
    Under the bilateral WTO agreement between the U.S. and 
China, China will be required to throw open the doors to its 
lucrative agricultural and high-tech markets. Chinese tariffs 
in numerous industrial sectors will fall precipitously, and 
many non-tariff barriers to U.S. investment in China will also 
be eliminated. Countless U.S. industries stand to benefit from 
this agreement, and the U.S. economy is protected from the 
dangers of market disruption under strict anti-dumping and 
surge-protection controls, based on China's being a non-market 
economy.
    What did the U.S. give up exchange? Virtually nothing. The 
U.S. will be required to make no market access concessions 
whatsoever. We are only required to maintain the same market 
access policies we are currently applying to China. It is a 
remarkable agreement.
    Put another way: those individuals who have expressed 
concerns about our ``trade imbalance'' with China--a concern 
that I believe is somewhat misplaced--should be rallying 
support for the China WTO Accession Agreement, not opposing it. 
Nothing in this agreement will increase Chinese imports into 
our already open U.S. markets--but much in it will help expand 
our exports to China's highly tariffed, highly regulated 
economy. Imports from China will continue, with or without 
Chinese entry into WTO; but passage of this agreement offers 
the best hope of increasing U.S. exports to China.
    In the interest of time, I will list only a few highlights 
of the WTO agreement that illustrate its vast promise to U.S. 
businesses. First and foremost, China has agreed to reduce 
tariff and non-tariff barriers on trade in agriculture, 
industrial goods and services. Under the agreement:
     China will cut agricultural tariffs in half by 
2004, with even deeper cuts on U.S. priority products such as 
beef and pork.
     Industrial tariffs will similarly fall--from an 
average of 24.6 percent in 1997, to an average of 9.4 percent 
by 2005.
     China will eliminate import duties on high 
technology goods by 2005 and allow foreign investment in the 
Chinese Internet sector.
     China will offer new market access and enact fair 
regulatory standards in the area of financial services and will 
open up the insurance and auto financing markets to U.S. 
companies.
     China will grant full trading rights to U.S. 
companies to import and export without going through a local 
trading company, so that American companies can distribute and 
service their own products in China, and own and manage their 
own distribution and service networks and warehouses.
     China will stop requiring U.S. companies to 
transfer their technology in order to export and invest in 
China, a concession that will protect U.S. competitiveness by 
preserving our valuable research and development.
    As I noted earlier, among the many U.S. industries that 
stand to reap huge benefits from this agreement is the 
agriculture industry. China is home to one-fifth of the world's 
population, and USDA has estimated that over the next several 
years, the demand for food will outpace increases in 
production, causing China to expand agricultural imports. 
According to USDA, China will consume approximately 26 percent 
of the value of bulk agricultural commodities and meats by 
2003. This agreement will create a level playing field so that 
American farmers and ranchers--who are the most efficient and 
competitive in the world--can capitalize on this demand and 
sell their products in the world's largest agricultural market. 
On U.S. priority agricultural products, tariffs will drop from 
an average of 31 percent to 14 percent by January 2004, with 
sharper drops for beef (45 percent to 12 percent), cheese (50 
percent to 12 percent), apples (30 percent to 10 percent), and 
wine and beer. China will also liberalize its purchases of bulk 
agricultural commodities such as U.S. corn, cotton, wheat, 
rice, barley, and soybeans. And for the first time, U.S. 
producers will also be able to export and distribute 
agricultural products directly inside China without going 
through Chinese middlemen.
    What does this all mean in dollars and cents? The U.S. 
Department of Agriculture has estimated that the value of these 
concessions to American farmers will reach $2 billion a year by 
2005.
    Another vital sector of the U.S. economy that stands to 
gain significant new market share in China is the automobile 
industry. Right now, a combination of sky-high trade barriers 
and prohibitive industrial policies has made it virtually 
impossible to export cars to China. Typically, the U.S. exports 
400-600 cars a year to China, many of them used--far less than 
a typical retail car dealership sells in one year. Under the 
accession agreement, tariffs on automobiles will plummet by 75 
percent--from today's rates of 80-100 percent to 25 percent in 
2006, and tariffs on automobile parts will also be reduced 
significantly--from an average of more than 23 percent to 10 
percent. In addition, China will be forbidden from exacting 
discriminatory value-added taxes and will be required to raise 
its prohibitive quota on automobile imports to $6 billion and 
then eliminate it altogether within five years. China has also 
agreed to open up services that are essential to automobile 
sales, by allowing U.S. companies to provide financing, set up 
dealerships, advertise their products, provide repair and 
maintenance and import parts.
    In addition to addressing the tariff and non-tariff 
barriers that have thwarted American companies trying to do 
business in China, the U.S. negotiators were also mindful of 
legitimate concerns expressed by members of Congress and others 
that any agreement with China must include strong market 
disruption and enforcement provisions. As a result, this 
agreement contains the strongest measures included in any WTO 
agreement to date, to prevent China and Chinese companies from 
acting in ways that could distort trade or undermine the U.S. 
economy.
    First, China has agreed to a 12-year country specific 
safeguard mechanism that will allow the U.S. to limit imports 
on an emergency basis if they threaten to disrupt the U.S. 
economy. This surge control mechanism applies across-the-board 
to all industries and will provide more effective relief than 
is currently available under U.S. law.
    Second, China has agreed that current U.S. practice under 
antidumping laws with respect to non-market economy countries 
will continue to apply to Chinese imports for 15 years after 
China's accession. That means we will continue to use the same 
methodology to determine whether imports from China are being 
dumped, and Chinese industries will continue to have the burden 
of proving that market economy conditions prevail in their 
industry in order to avoid application of the non-market 
economy methodology.
    In addition to these China-specific provisions, WTO 
accession is itself a better means for enforcing China's trade 
commitments, because China's promises will now be enforceable 
through the WTO dispute settlement process. China has never 
before agreed to subject its decisions to impartial review, and 
this will be the first time China will face the threat of 
sanctions if it does not follow the terms of a trade agreement. 
If China loses a dispute before the WTO, it will have to change 
its practice, provide compensation, or lose out on 
opportunities in the U.S. market. We have already seen how 
effective this process can be. The United States has a strong 
track record in WTO dispute settlement and has won, or 
otherwise successfully resolved, most of the complaints it has 
initiated.
    Finally, WTO accession does not mean that the U.S. 
government would turn a blind eye to any illegal Chinese trade 
practices. To the contrary, the U.S. plans to monitor and 
enforce China's compliance with the WTO agreement vigilantly 
and to ensure that American companies get the fair deal that 
China has promised to give them in this agreement. President 
Clinton has already asked Congress for new enforcement and 
compliance resources for USTR, the Commerce Department, USDA 
and the State Department, and the Administration has announced 
plans to increase by 75 percent the number of USTR staff 
devoted to monitoring and enforcing China's trade commitments.
    All of the concessions I have just outlined hold great 
promise for America's companies, but only if Congress takes the 
final necessary steps and grants China PNTR status. China has 
already stated that it plans to accept these terms as part of 
its effort to join the WTO regardless of whether the U.S. holds 
up its end of the bargain. And that means a vote against PNTR 
will leave American workers and businesses behind while our 
competitors in Asia, Latin America, Canada and Europe reap the 
benefits of U.S. efforts to open the Chinese market to foreign 
companies and products.

III. This Agreement Is Our Best Chance To Help Forge Political 
And Social Change In China.

    Opponents of the PNTR legislation have raised concerns that 
a vote in favor of PNTR would effectively endorse China's poor 
record in the areas of human rights and environmental and labor 
standards. The important thing to recognize, however, is that a 
vote against this bill is not a vote for more human rights, a 
better environment and better labor standards in China. It is 
simply a vote to isolate the Chinese economy and its citizens 
from America's democratic influences and to eliminate the 
chance that increased interactions with Americans through trade 
will expand the flow of free ideas -and our ideals--in China.
    PNTR opponents are right to say that this vote is not only 
about the future of our economic relationship with China but is 
also about the future direction that China will take 
politically and socially. But they are wrong when they ignore 
the higher probability that China will move in a constructive 
direction if it is included in the global community, rather 
than if it is isolated from the global economic and trading 
systems.
    By helping to open and liberalize China's economy, WTO 
accession will promote economic freedom and the rule of law in 
many sectors of the Chinese economy that are now dominated by 
state power and control. Compliance with WTO provisions will 
require reform in many areas of the Chinese economy and will 
require China to implement new laws and procedures that comply 
with WTO rules. In addition, increased foreign participation in 
China's telecommunications and Internet sectors will give the 
Chinese people more access to information and weaken the 
government's ability to isolate its citizens from democratic 
influences. In fact, several leading Chinese and Hong Kong 
advocates of democracy, including Martin Lee, the leader of 
Hong Kong's Democratic party and Ren Wan Ding, a dissident who 
spent many years in Chinese prisons, have endorsed China's WTO 
membership as a foundation for broader reforms in the future.
    I continue to believe that the most effective means for 
furthering the U.S. view on reform in China is increasing that 
nation's engagement with the international community. Exposure 
to the outside world will bring the Chinese people increased 
openness, social mobility and personal liberties. Over time, 
increased trade relations, people-to-people contacts through 
trade and over the Internet, and travel will be the most 
effective ways to loosen China's rigid authoritarian 
structures. WTO accession will bring all of these opportunities 
to the Chinese people and will offer additional opportunities 
for liberalization by opening up China's telecommunications and 
Internet sectors to foreign investment and involvement.
    Engagement with China through increased trade does not mean 
endorsement of China's political practices. So strong are U.S. 
convictions on this issue that earlier this year, Secretary 
Albright traveled to Geneva specifically to lobby for United 
Nations condemnation of China's human rights violations. 
Although Secretary Albright's efforts were ultimately 
unsuccessful, the Administration plans to continue pressing 
America's human rights agenda at the U.N. and in other forums, 
in an ongoing effort to bring the Chinese people an open and 
democratic society that protects their freedom and religious 
liberty.
    The point is this: saying ``no'' to PNTR will not bring 
freedom to the Chinese people. What it will do is limit their 
exposure to our democratic principles and beliefs by reducing 
the influence of American companies on Chinese society and 
slowing down Chinese access to liberalizing influences such as 
increased telecommunications and Internet access.
    A ``no'' vote on PNTR has also been urged by some 
environmental groups, on the ground that increasing our trade 
with China will somehow endorse that country's poor 
environmental practices. Once again, this argument contradicts 
common sense. Passage of PNTR is not only a chance to open 
China's markets to U.S. exports but also to facilitate 
cooperation with China on environmental issues. After the U.S., 
China is the world's largest energy consumer and largest 
emitter of greenhouse gases. While China has already begun to 
take steps to combat environmental degradation, much more needs 
to be done. This agreement offers another opportunity to 
promote bilateral environmental engagement with China.
    We have already begun to see that more interaction with 
Western economies does have the potential to heighten 
environmental concerns. U.S. companies have begun introducing 
environmental technologies and industrial systems that minimize 
waste, control emissions and enhance safety. And not 
surprisingly, the majority of the Chinese cities that have met 
national air quality standards to date are the coastal cities 
that opened up to foreign trade and investment in the 1980s. 
The WTO agreement will provide additional opportunities for 
environmental protection and cleaner economic development in 
China by promoting the export of environmentally friendly goods 
and services to China. Passing this bill will therefore give us 
one more tool for trying to influence China's behavior on 
international environmental issues.
    Finally, the PNTR bill is also our best chance to improve 
labor standards for Chinese workers. China's WTO accession will 
further open China to U.S. labor values and practices, by 
increasing the presence of U.S. companies that are committed to 
progressive labor management practices and protecting the 
safety of their workers. In addition, the U.S. intends to 
continue pressing China to respect internationally recognized 
labor rights. The U.S. and China have been engaged in a 
bilateral labor dialogue since 1998, and through that dialogue, 
the U.S. has placed a priority on the implementation of 
internationally recognized labor standards, and an end to the 
detention, arrest and imprisonment of persons for labor-related 
activities that are protected by the International Labor 
Organization.
    Lest we take any step that could be interpreted as even a 
tacit approval of China's human rights and labor policies, I 
believe it makes sense for this Committee and Congress to 
consider other measures to respond to these concerns. 
Congressman Levin has proposed, for example, the creation of a 
Congressional/Executive Branch commission that would report 
annually on China's record in the areas of human rights, 
religious freedom and labor practices, and on the overall 
U.S.--China relationship. The Commission would then make 
recommendations to Congress on whether U.S. policies toward 
China should be changed in response to China's record in these 
areas.
    While these proposals, or others like them, may help 
maintain pressure on the Chinese government to comply with 
basic human rights and environmental standards, I want to 
emphasize that with or without such a package, the PNTR bill 
does not change this country's basic policies toward the 
Chinese government. Instead, it will simply eliminate the 
annual NTR process in Congress, which has never been an 
effective leverage point for spurring democratic reforms. 
Congress has voted to extend normal trade relations with China 
every year since 1980, and there is no indication that Congress 
intends suddenly to change course and use that process to raise 
tariffs on Chinese products. That means passage of PNTR will 
only send China the same message we have sent for twenty years, 
while the WTO agreement will send a strong positive message, by 
speeding up the process of economic reform and strengthening 
the rule of law in China.
    I have heard some PNTR opponents acknowledge as much--that 
is, that the current annual NTR vote has yielded little in the 
way of leverage in the relationship with China -and that 
perhaps Congress should try a different response, such as 
voting down NTR status for China, and raising tariff and trade 
barriers against Chinese imports. Such a drastic action would 
give the annual NTR vote added meaning, no doubt. But the 
meaning that would be created would be the launching of 
dangerous new global trade disputes, with serious consequences 
for the U.S. economy, our jobs, and the world's economic 
future. If it is not sensible, from my perspective, to see the 
U.S. to fail to move forward toward further trade 
liberalization--as I have argued today--then it certainly does 
not make sense, in my view, to see us move back toward the days 
of Smoot-Hawley.
    As a nation that was founded on basic principles of 
individual liberty and religious freedom, we have strong 
concerns about China's human rights abuses and the government's 
oppression of political and religious dissidents. And I agree 
with critics of PNTR when they say that we have an obligation 
not to endorse -or even worse, promote--the suppression of 
democratic principles and personal liberties in China. Where I 
differ with them, however, is in their belief that passing this 
bill would be a human rights setback. Do you really think that 
China's government will suddenly become more liberal if we 
attempt to deny its citizens access to the Internet and 
interaction with foreign companies and governments? Along with 
this Administration and every other Democratic and Republican 
administration over the last three decades, I believe that the 
answer is ``no.''
    Turning our backs on the Chinese market for U.S. goods and 
services would be, to use a popular expression, biting our nose 
to spite our face. Not only would American companies lose out 
on a hugely profitable market for American goods and services, 
but we would also lose the opportunity to bring change to China 
through the gradual influence of economic and political 
engagement.

IV. As The World Leader On Global Trade Issues, America Has The 
Opportunity and Responsibility To Shape A Global System Of 
Freer Trade.

    During the next few weeks, you will be barraged by numerous 
contradictory arguments about what is in America's best 
interests. I urge you to consider this vote as--not just 
another vote on another trade measure--but a vote on a question 
that is central to America's economic future. It is that 
important.
    Over the last twenty years, we have experienced an 
electrifying pace of global liberalization in trade. Through a 
series of bilateral and multilateral agreements, we have seen 
tariffs and other protectionist walls crumble in Europe, North 
America and Asia. These changes have brought economic benefits 
to our nation and to numerous other nations around the world. 
But more work remains to be done. The PNTR bill is your 
opportunity to cast a vote for the single most important item 
on the U.S. and global trade agenda. A setback could have 
severe negative implications not only for the U.S. economy and 
the Chinese people, but to all our interests and concerns with 
respect to China.
    The outstanding performance of the U.S. economy over the 
past few years is a testament to, and a product of, our 
approach to dealing with the dynamic factors of technological 
change and globalization. While recognizing that these forces 
of change have costs, we have embraced the benefits of these 
changes and sought to put in place policies that help maximize 
these benefits and minimize the adverse consequences. We have 
opened our markets, increased investment in educating our 
people, balanced our budget, pursued new trade agreements 
around the world -and reaped an unprecedented economic 
prosperity.
    Our challenge--our opportunity--is to decide what is the 
next step. The global trade system, which has played such a 
large part in U.S. prosperity, is the product, in large part, 
of U.S. leadership. Will we continue to offer that leadership 
now -and continue to reap the rewards of that leadership--or 
will we reverse direction with the consequent result that trade 
liberalization will slow or even move backwards? Will we build 
on our record of success--of increased growth, employment, 
wages, and prosperity -or will we abandon that role? For years 
to come, that future of our economy, and to a great extent, the 
world economy, will be very much affected by what you, here in 
the Congress, do in the next few weeks.
    Turning our back on -or trying to turn back--the progress 
in this global trading system would be bad for countless 
nations, not the least of which is our own. The other developed 
market economy countries are looking to the United States to 
continue to advance policies that contribute to economic 
strength and prosperity, at a time of great technological 
change. The developing and emerging market economies are 
looking to us to help build a path on which they can succeed. 
And no nation stands to profit and prosper more than the United 
States if our leadership in these matters meets the needs, 
hopes, and aspirations of our global trading partners.
    By passing PNTR legislation, the Congress can claim credit 
for opening Chinese markets to U.S. goods, providing exciting 
opportunities for American businesses and creating more high-
wage jobs that will carry our economic expansion far into the 
21st century. And at the same time, you will be opening Chinese 
society to America's democratic ideals, and helping influence 
that country's future as we sow the seeds of freedom for 
China's 1.2 billion citizens.
    At the end of the day, all of us, together, face a simple 
but stark choice: We can take a step forward toward engagement 
of our global partners and the open trade in commerce and 
ideas, or we can retreat to the failed isolationism that 
characterized our nation's trade policies in the first half of 
the 20th century. If we do the right thing and take a step 
forward, the U.S. will have exercised its leadership role in a 
way that is good for the American economy, that furthers our 
national security interests and that promotes our fundamental 
democratic ideals throughout the world.
      

                                


    Chairman Archer. Thank you, Mr. Secretary.
    Could we just for a moment discuss between us, what are the 
arguments on the other side that say no, we shouldn't do this?
    Mr. Rubin. My impression, Mr. Chairman, but you would know 
better than I, is that they break probably in a broad sense 
into two pieces. One is a trade related piece, focusing on the 
very large trade deficit we have with China. And I guess my 
answer to that would be that there's nothing in this agreement 
that's going to increase imports into the United States, number 
one.
    Number two, I think that the imports that we have, that 
imports have contributed very--the openness of our markets and 
imports have contributed very substantially to our economic 
well-being. I think had we had not had open markets, I think we 
would have had substantially less attractive economic 
conditions over the past seven years than we've had with these 
open markets. And the WTO accession agreement gives us the 
opportunity now to export much more readily to China. So it 
should on balance, I think, contribute to reducing the trade 
deficit.
    And the other is the argument that we are in some fashion 
or another endorsing China's human rights or labor rights or 
environmental protection policies. And it seems to me that's 
just wrong. In many other ways, the Congress and the 
Administration have acted to further our views on these 
subjects. And I don't think there's any lack of clarify about 
how the United States feels on these issues. I think the only 
real question, practical question, is, does WTO accession 
further our concerns and interests with respect to human rights 
and labor rights, or is it detrimental? In my opinion it 
clearly, for the reasons I said, furthers our interests.
    Chairman Archer. Well, you make, I think, two very good 
points. Number one, the trade deficit with China is a matter of 
some concern. I'm sure it is to you and it is to me. But if we 
do not pass this permanent trade relations with China, it can 
only increase and not decrease. Whereas if we do pass it, we 
get the benefit of the concessions the Chinese have made for 
entry into their market, which will give us the opportunity to 
export more and the opportunity to reduce what otherwise would 
be the trade deficit. That just seems so logical to me.
    And as far as the human rights situation, two sides can 
disagree. It doesn't mean that either side is less concerned 
about the human rights situation. But from a logical 
standpoint, I don't see any way that slamming the door on trade 
relations with China is going to increase our leverage or our 
ability to help move them in whatever way we can to better 
human rights.
    While at the same time, recognizing what I think Jesse 
Ventura was very, very accurate about when he testified before 
this Committee about a month ago, and he said, in the end, only 
the Chinese internally will be able to move their human rights 
standards in the right direction. And I think there's a lot of 
truth in that.
    So I thank you for analyzing those arguments with me and 
it's nice to have agreement between the two of us.
    Mr. Rubin. Thank you, Mr. Chairman.
    Chairman Archer. Mr. Rangel.
    Mr. Rangel. Welcome, my friend.
    Continuing this line of questioning, slamming the door on 
China to me doesn't promote any progress in the area of human 
rights or moving toward democracy. I just don't understand why 
slamming the door on Cuba, we think that it would. And you 
know, it's the same people here, the same Administration. And I 
can't use the word hypocrisy, but I wish I could find one 
that's more appropriate.
    You're dealing with communists, you're dealing with people 
who have no respect for human rights. And you're saying, 
opening the doors, engaging it, makes it easier for us to move 
democracy further. Why not Cuba? Why not put a package together 
and say, all communist countries, we want to bring it to its 
knees and we can't do it through disengagement, and standing 
outside and screaming at them.
    So we're going to allow the free market system to work its 
will and bring them to their knees and respect democracy. What 
the heck's the difference? Florida? [Laughter.]
    Mr. Rubin. Well, I'm only a private citizen, Mr. Rangel. So 
I--
    Mr. Rangel. That's where we get the most honest answers.
    Mr. Rubin. Oh, I see. Okay, well, I thought I'd avoid it 
that way. Let me try another way. [Laughter.]
    Mr. Rubin. I think, Mr. Rangel, the argument that you make 
is a powerful argument. Having said that, you know, we've had a 
policy for I guess six or seven administrations consistently in 
the other direction. As I say, I think your arguments have a 
lot of power, but I don't carry a brief one way or the other on 
Cuba. The concern I have at the moment is China.
    But I will say that you arguments have a lot of power to 
them.
    Mr. Rangel. Well, I guess that means that there are 
political reasons why we can't deal with Cuba, and that's that.
    Now, let me ask you this. Worst case scenario, we don't 
take up this bill for reasons that are not partisan. But 
there's a commitment that there will be a bipartisan effort to 
pass it in April or May. And assuming the Chinese won't accept 
this because they would be indignant, you know, that once again 
they've been rebuffed by the imperialists.
    But what happens to us? Do they then say, well, since you 
didn't make permanent the trade relationship, that you don't 
have access to our markets? And then the Europeans and others 
just go in and in a few months they cut us out of the greatest 
agreement that we could possibly have negotiated?
    I'm just trying to find, it wasn't too long ago that we 
were not certain that we were going to take up this bill. And 
then when they said we were going to take it up, we said, well, 
it all depends on what China does with the European Union. And 
then the last word, well, the longer it takes the closer it 
gets to election, the more difficult it is to pass it.
    All of these were not diplomatic or economic reasons. They 
were all political reasons.
    Now, if those things had happened and we didn't pass the 
bill, and you were there now trying to repair the damages, what 
damage could possibly be done if the scenario was that it would 
pass early next year?
    Mr. Rubin. I guess what strikes me, Mr. Rangel, is that 
there are at least two risks. There may be more that don't 
occur to me. One of them is that if the EU works out their 
arrangements with China in the meanwhile, and if China then 
accedes to the WTO, what China could do is accede and in 
effect, I have forgotten the technical term, but their 
accession would not apply to the United States.
    So that Europe and Japan and others would all have access 
to China's markets on the more favorable terms and the WTO 
agreement. And we would not have access to those more favorable 
terms, in which case, as the Chairman said before, our trade 
deficit would increase and we would not get the benefit of--we 
would actually become less competitive in China than we are 
today.
    I think an even worse other possibility, since I think 
China accession to WTO is very, very important, exceedingly 
important to this country, is that time is not your friend in 
any of these situations. And if you delay something six months, 
anything can happen. You can have changes, political conditions 
in this country, in that country. There's no telling what might 
happen.
    And I think it would be a true, a great misfortune if China 
was not brought into WTO and brought closer to the global 
community in that way. And I don't think it's a risk that we 
should take.
    Mr. Rangel. Well, it may not be a risk that we should take. 
Some members might be risking their seats, which they may have 
some priority in terms of how they look at this whole picture.
    But what I don't understand is how we give so much leeway 
to these communist rascals in saying that if we don't do it 
their way, it's the highway. In other words, we're saying this. 
If we insult them by not making permanent our trade 
relationship, then will they get even with us by cutting a 
better deal with the Europeans. One and two, even though I know 
that when it comes to human rights and workers' rights, 
everyone says, look in your own back yard, and we're doing 
pretty good.
    The Chinese never seem to give up anything. I mean, they 
don't even talk about doing better. It's always on our side 
that we have to engage them, and then automatically they would 
do--they don't even admit there's a problem there.
    It would seem to me that if for whatever reason this was 
not passed that we would be dealing with at least people who 
are friendly and would not try to deliberately cut us out of a 
hard, worked-out agreement that we would benefit from. But just 
because this political, cantankerous Congress did not agree 
with our tremendously insighted leadership, the President of 
the United States, that they would just penalize all of us and 
say, we're not going to let you take advantage of our markets, 
but Spain and the Soviets and the rest of them can come right 
in.
    What kind of people are we dealing with anyway?
    Mr. Rubin. Well, I'll give you my view, Mr. Rangel. The 
rest of the world is prepared to have China accede to the WTO. 
I guess if I were on their side of this and I saw that the only 
people in the world that were not prepared to do it were the 
Americans, I guess I would have a little bit of a feeling that 
if I wanted to disallow their participation, the benefits of 
WTO, that was an appropriate thing to do. But I can't speak for 
the Chinese. I have no idea how they'd react.
    I guess I always come back to the same thing. We have an 
agreement that overwhelmingly, in fact really totally, for 
practical purposes, totally in our favor. And why take a risk, 
and I think maybe even a substantial risk, that we won't get 
the benefits of that if we don't move forward this year?
    Mr. Rangel. If we don't do it this year, we can just forget 
about it for next year.
    Mr. Rubin. No, I'm just saying if we don't do it this year, 
conditions may change here, they may change there. They may 
accede to WTO and disallow our getting the benefit. And it 
seems to me a set of risks that doesn't have, a set of risks 
for which there is no reason on our part.
    Mr. Rangel. You know, you and the President read from the 
same script. But I was among those that supported this great 
1994 budget that President Clinton had that brought us this 
prosperity, when we didn't have one Republican supporting him. 
And we lost 54 seats. Now, I know in history they'll be heroes 
and martyrs.
    But it just seems to me that you just can't discount it and 
just say, well, I don't see where we can even consider doing 
this next year. I thought that after you left the 
Administration and became a private citizen that you'd be more 
sensitive to these things. [Laughter.]
    Mr. Rubin. I guess I carried my insensitivity to the 
private life.
    Mr. Rangel. Thank you very much. We appreciate the 
contribution you've made.
    Mr. Rubin. Thank you, Mr. Rangel.
    Chairman Archer. Mr. Crane.
    Mr. Crane. Thank you, Mr. Chairman. And Mr. Secretary, I'm 
going to read a quote here to you and then ask you a question 
as to the origin, the source of the quote. ``Democracy, 
including rights for workers, is an evolutionary process. 
Isolation and containment will not promote improved rights for 
a people. Rather, working together and from within a society 
will over time promote improved conditions. The U.S.--China WTO 
agreement will speed up the evolutionary process in China. 
American labor should support it, because it is in our interest 
and in the interest of Chinese workers, too.''
    Any idea who--
    Mr. Rubin. I don't know who the footnote is, but I would 
say, Mr. Crane, that there is nothing in there that I would 
disagree with.
    Mr. Crane. Absolutely. Well, the source of that is Leonard 
Woodcock, former president of the United Auto Workers for about 
seven or eight years. And Leonard Woodcock is one of the most 
fervent supporters of advancing permanent normal trade 
relations with China, and ironically, he was the ambassador 
over there that participated in China's accession, I mean 
getting what we then called most favored nation status and has 
been normal trade relations in modern times.
    So I commend him. He raises a question, a legitimate 
question as to why some of his colleagues in the labor movement 
are opposed to this, and he points out that it is a win-win 
proposition and it's something that not only economically is 
beneficial for us, but it advances other values that we 
cherish, too, including free enterprise and democratic 
institutions.
    So I hope that we can get his message disseminated more 
fully, and I commend you for your comments, too.
    Mr. Rubin. Thank you, Mr. Crane.
    Mr. Crane. I yield back the balance of my time.
    Chairman Archer. Mr. McCrery.
    Mr. McCrery. Thank you, Mr. Chairman.
    Welcome again, Secretary Rubin.
    Mr. Rubin. Thank you.
    Mr. McCrery. Mr. Chairman, I don't really have any 
questions for the Secretary. But I do want to give him a chance 
to respond to a statement that I'll make. I had hoped to ask 
Trade Representative Barshefsky to clarify a point that 
Representative Wolf made in his testimony earlier today. 
Representative Wolf said that, or at least I heard him say, and 
I think this is what he said, that if we turn down permanent 
NTR for China this year that was no bar to implementing the 
trade agreement that Trade Representative Barshefsky had 
negotiated with China, that we could do just an annual renewal 
of NTR, and that would serve juste as well.
    I did not think that was the case. And so after the earlier 
panel had concluded, I went down and spoke with Ms. Barshefsky. 
And she said no, that is absolutely not the case, that they 
have had the legal eagles at GAO, Treasury Department, and 
other places, look at the agreement and in fact, it is 
contingent upon United States' granting permanent NTR to China.
    So I just wanted to get that cleared up. And Mr. Secretary, 
maybe you are familiar with that issue and you could expound 
upon that.
    Mr. Rubin. Yes, what you said is correct. I think it's a 
technical issue, and let me tell you what the answer is. You 
can check it, but I think this is right. That the WTO agreement 
itself, not the U.S.--China agreement, but the basic documents 
of the WTO require that the trade, that the trade conditions, 
or the trade provisions not be conditioned on anything, that 
there be no conditionality to trade concessions. And if our 
agreement with China is conditioned on an annual NTR, then that 
would be a violation of that non-conditionality provision in 
the basic documents of the WTO. I think that's the technical 
response to your point, I believe. But you can check that.
    Mr. McCrery. But the effect is that if we do not pass 
permanent NTR then--
    Mr. Rubin. We are not in compliance.
    Mr. McCrery.--the agreement that Ms. Barshefsky negotiated 
is null and void, it has no effect.
    Mr. Rubin. It would not be unconditional, and therefore we 
would not have effectively acceded to China's accession, and we 
would not, and if they chose to, then we would not get the 
benefits of their accession to WTO. That is correct.
    Mr. McCrery. And therefore, this one-side agreement in our 
favor would not come to pass, and the very people, and I think 
Mr. Crane did is a service by reading the statement from Mr. 
Woodcock, it's beyond me, and I've talked with my UAW guys from 
Shreveport, and I do not understand their point of view.
    When we're going to ratify basically an agreement with 
China that lowers the tariffs on automobiles, significantly, 
which gives us greater opportunity to export automobiles to 
China, which could preserve jobs here in the United States, I 
just don't understand their point of view. To me, this is a 
very one-sided agreement in our favor. It gives us an 
opportunity to build jobs here in the United States.
    And organized labor ought to be jumping up and down for us 
to ratify this and get on with having a more normal trade 
relationship with China that is more open on China's side.
    Mr. Rubin. I believe if you check, you'll find that we 
export something like 600 or 700 cars a year to China 
currently. And this is going to reduce, I think, tariffs by 75 
or 80 percent, which presumably would make a very substantial 
difference in our ability to compete, I would think.
    Mr. McCrery. Absolutely.
    Thank you, Mr. Chairman.
    Chairman Archer. Mr. Levin.
    Mr. Levin. Thank you very much, and welcome, Mr. Former 
Secretary. [Laughter.]
    Mr. Levin. It's so good to see you again.
    If I could follow up on what Mr. McCrery asked regarding 
this agreement, I think it's true that in terms of the 
concessions, it's one-sided. Because our tariffs are so low, 
for example, and their tariffs would be reduced, though not all 
the way. I might mention, though, for example, in the 
automotive sector, I believe it's an accurate statement that 
the tariffs for China would become lower than the tariffs for 
any other Asian nation except Japan.
    There are higher tariffs within the WTO scheme and would be 
allocated or stipulated as to the China's market. But with your 
background in investment, and your present involvement, I think 
you would acknowledge that one aspect of this, one result of 
this agreement is that it may well make investment in China 
more attractive, more secure just because in part, hopefully 
the rule of law would be more effectively evolved, grown, 
within China.
    So the concern of some, and I think it's a legitimate 
concern, is that as investment becomes more secure, competition 
will grow with the United States. That would be one of the 
results.
    And I think you were in on the discussions within the White 
House more than a year ago, not to pry into those, which were 
between all of you, but as I understand it, one of the issues 
that was discussed then was the anti-surge provision, which is 
a response to the likelihood that investment would be more 
secure in China and therefore it is feasible and perhaps 
probable that there would evolve within China the development 
of, for example, industrial manufacturing capacity, which could 
over time compete with the U.S. and could involve imports from 
China into the United States with their different structure.
    And as I understand it, as I said, it was for that reason 
that there was a strong insistence within the Administration, 
surely on the part of some that there be placed into the 
negotiations with China an insistence on an anti-surge 
provision. So I would appreciate your comments on that, as much 
as you can reflect within the limits of the confidential nature 
of discussions within the White House. If you could just 
elaborate on that, your feelings about investment, the anti-
surge provision, etc.
    Mr. Rubin. Let me if I may just do it in the opposite 
direction of the points you raised. I think it is very 
important that there be a strong anti-surge provision, and 
there is, in the WTO agreement. Because China is a non-market 
economy. And the problem we faced was that instead of market 
forces determining what flowed in the United States, in a non-
market economy, you could have directed sales into this country 
at non-economic prices and things of that sort.
    And this WTO agreement has an extraordinarily good 
provision, as you know, on surge protection. My recollection is 
it's 15 years.
    Mr. Levin. Twelve years. And also--
    Mr. Rubin. I apologize, 12 years.
    Mr. Levin.--the non-market economy provision for anti-
dumping that I think you're also--
    Mr. Rubin. And they're both based on precisely what you 
just said, that this is a non-market economy. So that's the 
surge protection.
    I think the other is a separate, independent point. I think 
I probably have a somewhat different viewpoint. I think the 
greater security would rest with greater investment. I actually 
think it's good for this country. Generally speaking, where we 
invest more we also, our exports follow our investments. Where 
we invest, we then tend to import from, more from the United 
States than would companies owned by companies in other 
countries doing the same thing.
    And secondly, if China becomes more competitive with us and 
has higher standards of living and a larger GDP and all the 
rest, there would be a better market for us. And that's sort of 
what's happened around the developing world. I think one reason 
we have had such high growth and low inflation and low 
unemployment and everything else is that developing countries 
have become much better markets for us, and it's fed the 
system. And we import the things that we can buy most cheaply 
elsewhere, and we export the things we produce most 
advantageously here. And I think it's been to our benefit.
    Mr. Levin. Thank you.
    Chairman Archer. Mrs. Johnson.
    Mrs. Johnson. Welcome, Mr. Secretary. It's a pleasure to 
have you before us.
    I don't know how familiar you are with the surge provisions 
in the agreement. But they have impressed me as being a much 
needed tool to manage the flows, the change in flows in economy 
as they open up. And particularly the impact that those change 
flows can have on specific communities.
    Do you have any comment on those surge provisions and 
whether or not they'll require legislation to implement them?
    Mr. Rubin. I guess my view would be as follows. I think 
that having surge provisions in this agreement was exceedingly 
important for the reasons we were just discussing. This is a 
non-market economy, and that creates a whole different 
situation. So that's that.
    I guess on the question of surge provisions more generally, 
I totally agree on the effects of the surge provisions of the 
WTO agreement. I think it's a very important protection because 
of the non-market economy aspect of China. I guess we're 
dealing with market economies. And my view is, and I think not 
a very popular view, since I believe that imports are good for 
this country, and I think that we benefit as we import, I think 
that it is useful to have surge provisions that deal with 
extreme conditions. But I am inclined to think that, I would 
limit them to extreme conditions.
    Mrs. Johnson. Thank you.
    Chairman Archer. Mr. English.
    Mr. English. Thank you, Mr. Chairman.
    Welcome back, Mr. Secretary. And I very much appreciate the 
opportunity to raise with you a number of the issues that I've 
come across as I've discussed this issue in my district. As you 
know, I have a district which is oriented toward manufacturing, 
very heavily, has a substantial domestic steel industry and a 
lot of local people have had questions about this bilateral 
agreement.
    Can you put something to rest for us right here? Is there 
anything in this bilateral agreement that provides any 
additional incentive to take jobs offshore?
    Mr. Rubin. I think that the overwhelming effect of this 
agreement will be to increase jobs in the United States. 
Because barriers in China are coming down so very 
substantially. It seems to me that creates the likelihood of 
substantially increased exports from the United States to 
China. And some people have estimated it will double over the 
next five years to $26 billion or something like that.
    There's nothing in the agreement that I can think of that 
should result in jobs moving offshore. Not as far as I can 
think.
    Mr. English. In other words, any incentive for jobs to move 
offshore already exist in our policy, and this isn't changing 
any aspect of that. What we have instead is a one-sided set of 
concessions from China that provide opportunities for us to 
export into their market. Is that not your understanding?
    Mr. Rubin. I think that is exactly correct. And if there is 
anything that would cause a job to move abroad, and I don't 
think there is anything, but even if there is, it would be 
overwhelmed in magnitude by the effects that you've just cited.
    Mr. English. Mr. Secretary, will these market access 
concessions still be available to U.S. companies and through 
them, to U.S. workers, if Congress fails to enact permanent 
NTR? I've heard arguments from some opponents of permanent NTR 
that suggest that we're going to get all of these goodies 
anyway, so why bother to respond. What is your understanding of 
the 1979 treaty versus the concessions that are included in 
this package?
    Mr. Rubin. I think it's an important question. I think the 
simple answer to your question is, no, we would not get the 
benefits. And I break it into two pieces.
    On all the non-tariff benefits of this agreement, and I 
think they are very, very important, I'm on the board of Ford 
Motor Company, and the notion of being able to have your own 
export and import capabilities, to be able to service cars and 
things like that, that's a big, big deal. None of that was in 
the 1979 agreement. So you only get that with WTO accession. 
And the same thing is true with respect to services.
    On tariff reductions, which were in the 1979 agreement, we 
might or might get them without this WTO accession. But there 
is a very strong argument that since we are a member of the 
WTO, if China joins and we don't accede, then they can disallow 
our getting the benefits under the WTO agreement, and that 
would trump the 1979 agreement. That's a legal uncertainty, it 
would have to be determined.
    But even if the tariff reductions were to be received, the 
benefits with respect to services, imports, exports, exports, 
distribution repair and all that sort of thing would not be 
available to American companies.
    Mr. English. So at very best, if we do not follow through 
on this agreement, we will get at best only the tariff side of 
the arrangements, which is probably a minority of the benefits?
    Mr. Rubin. Well, we certainly at best only get that. And 
that's an uncertainty.
    Mr. English. It's problematic.
    Mr. Rubin. Yes. It's an uncertainty that I don't know the 
answer to. Nobody knows the answer to.
    Mr. English. In your view, will this bilateral agreement be 
enforceable? After all, I'm hearing a lot of complaints about 
China's adherence to our agreements over the years. I know 
while you were Secretary of the Treasury, we had to confront 
them on a number of occasions on things like the TRIPS 
agreement.
    Are you confident that this bilateral agreement will be 
enforceable with the mechanisms put into place?
    Mr. Rubin. Well, I guess, Mr. English, my answer to that 
would be that one can never tell what would happen. But you 
have now a multilateral, objective enforcement mechanism in the 
WTO. And if China does not live up to their agreements, then we 
have the right to impose sanctions.
    So while I can't be, nobody can assure you they'll do what 
they should do, but I think people can assure you there is now 
a way to impose effective sanctions if they don't. This is the 
first time China trade law has been subject to that kind of 
enforcement mechanism.
    Mr. English. Thank you, Mr. Secretary. As always, your 
testimony is succinct and powerful and persuasive. And I 
appreciate your time today.
    Mr. Rubin. Thank you, Mr. English.
    Chairman Archer. Mr. Kleczka.
    Mr. Kleczka. Thank you, Mr. Chairman.
    Mr. Rubin, my questions might be somewhat rhetorical to 
you, because they were geared for Ambassador Barshefsky, but 
she could not return after our lunch break. And in response to 
some of her statements. So at will, respond to the ones you're 
capable of or you want to, and then I guess as the Chairman 
suggested, I'll probably have to drop her a line, or meet again 
with her in the office.
    But it's been repeated here many times this morning and now 
early this afternoon that the Chinese gave nothing. It was all 
one-sided. We got everything. Well, that type of dialogue and 
conversation is good for our rec room when the boys and our 
ladies are sitting around, you know, rehashing how we did. But 
to say those things in public makes me wonder what the Chinese 
are saying.
    On Beijing television tonight, we're going to get some of 
the clips from some of the cameras who are here, and they're 
going to say, good, I'm glad to we got nothing from them. You 
know, so something's wrong with that picture. And we're all 
familiar with negotiations, be it labor negotiations, or for 
yourself, trade negotiations. There's always give and take.
    But for the Ambassador to come before us today and say, 
these folks got nothing and we got everything, I just don't 
believe it.
    Mr. Rubin. Well, I'll tell you what I think the Chinese got 
out of this, and I think it's enormously important to China, 
though I think it's in our interest as well. What I'm about to 
tell you, you know. But what you had over the last several 
years in China is an effort to reform a system that has been 
government run based on these state-owned enterprises, and it 
is an enormously difficult thing to accomplish. I think what 
this will do is put tremendous additional pressure on the state 
owned enterprises to restructure and become competitive. And 
that is a tremendous benefit.
    Mr. Kleczka. Well, for the reformers, so then China got 
something. But that's not for those who still don't agree with 
the agreement that we negotiated.
    Mr. Rubin. Well, China got something. But what they got was 
not at a cost to us.
    Mr. Kleczka. Right. But there's got to be something else 
here. We've had some dialogue between yourself and Mr. Levin 
about the investment that now can be made in China in a more 
safe manner, in a more attractive manner. I would assume that's 
a plus for China. You know, there might be some investment 
today, but the threat of nationalization of that investment is 
probably pretty high.
    So under this agreement, American companies and American 
capital can go down to China and there is going to be some 
guarantee or a better feeling that not only is that investment 
going to be attractive but also profitable. So would that be a 
fair analysis?
    Mr. Rubin. I think the correct statement on the balance of 
gains and losses on this is that with respect to trade 
concessions, that they were 100 percent on China's part and 
zero percent on our part. It is--I think that's true.
    Mr. Kleczka. It was a broader statement in my estimation, 
but maybe I'm wrong.
    Mr. Rubin. Oh, I don't know what the statement was. But I'm 
just saying, that is true.
    Mr. Kleczka. It's one-sided, they gave nothing. Now, that's 
pretty broad.
    Mr. Rubin. Well, they give us the opportunity to invest in 
their country on a more secure basis. I think it's good for us 
and good for them.
    Mr. Kleczka. Okay, but that's good for them. And it's good 
for the investors faced with a market economy, or lack of a 
market economy, but wage rates much, much below the United 
States. So if I were making widgets, and now I could pour $50 
million into China to open up a widget shop, and instead of 
paying a minimum wage to American workers, I can now pay 13 
cents a wage, that's a pretty big concession for me.
    Mr. Rubin. It is, and indeed--
    Mr. Kleczka. And for the Chinese to employ some of the 1.2 
billion people.
    Mr. Rubin. It is, indeed. I think the one caveat to my 
answer to Mr. English was that to the extent that caused an 
increase in investment in the United States, that may cause--
I'm sorry, in China--that may cause some job movement to China. 
But I think that would be vastly overwhelmed by the job 
creation here that came as a consequence of the enormous 
reduction in trade barriers in China, which would increase 
imports from the United States to China. That's why I answered 
the question the way that I did.
    Mr. Kleczka. See, but on this very same train of thought, 
we were told the same thing about free trade with Mexico. And 
over the years, we've seen that trade deficit just balloon and 
balloon. Companies like Master Lock in Milwaukee closing up to 
move the entire operation to Mexico.
    And so you can see where some of us, and when people bring 
the NAFTA thing up to me, I say, we're not talking NAFTA, I try 
to get them off of it. But as I sit back and have my cup of 
coffee in the morning, I say, oh, boy, it sure sounds something 
like that.
    Mr. Rubin. Could I suggest another answer on NAFTA, because 
I think it's the truth?
    Mr. Kleczka. Please.
    Mr. Rubin. Had it not been for NAFTA, my view is at least, 
had it not been for NAFTA, I think what probably would have 
happened when the Mexican peso crisis hit, because that's after 
what caused the trade deficit, is I think there was a very 
strong temptation in Mexico to do what they did in the early 
1980s, which is increase tariffs. I think in that case they 
increased them to 100 percent or something. I don't remember 
exactly, but increased them vastly.
    Our exports would have gone down far more. The trade 
deficit would have gone up much more, and the job loss in the 
United States would have been much greater. I think NAFTA 
actually was enormously in the interest of American workers as 
things took--even more in the context of the peso crisis than 
it would have been otherwise.
    Mr. Kleczka. Mr. Chairman, if I could ask one more 
question, then I won't naturally come back on the second round.
    Now, if in fact the Congress would not be supportive of 
permanent trade status, but would vote for annual trade status, 
would it be still possible if the Chinese agreed to honor the 
agreements that they made with our negotiators?
    Mr. Rubin. Well, they can have--
    Mr. Kleczka. They'd have no responsibility or mandate to do 
so. But if they thought some of the things in this agreement, 
and I don't think it's all one-sided, are pro-China, if they 
said, well, they're going to do us on an annual basis, we're 
going to give them all the rights and benefits of the agreement 
and next year, hopefully they'll make it permanent, they won't 
have to lobby the Congress or whatever the rationale is.
    Could they on their own motion do that?
    Mr. Rubin. Well, they can do whatever they want under their 
own laws with respect to tariffs on American exports. But I 
think the problem, and you can double check me with the USTR, 
but I think you'll find that the problem is that they're not 
obligated under WTO.
    Mr. Kleczka. And I think we agree with that.
    Mr. Rubin. And that's the trouble.
    Mr. Kleczka. But if they wanted to, for whatever reason.
    Mr. Rubin. Yes, but see, if they want to, and then they 
decide, and then they decide to violate whatever agreement they 
have with us--
    Mr. Kleczka. Tough. We have very little leg to stand on, 
because they're doing it voluntarily.
    Mr. Rubin. Because they're doing it voluntarily. But if 
they do it on WTO, then we have sanctions. You've got it 
exactly.
    Mr. Kleczka. Oh. So that might be the case. Thank you, Mr. 
Chairman.
    Mr. Rubin. You have it exactly right.
    Mr. Kleczka. Thanks for your latitude, Mr. Chairman.
    Chairman Archer. If I might just jump in briefly, because 
it's a good question, what's in it for the Chinese. Clearly, 
the bilateral negotiations that we have had with the Chinese 
are totally one-sided. We gave up nothing. I mean, that's a 
reality. We gave up no tariffs, we gave up no quotas, we gave 
up no existing barriers to imports coming into the United 
States.
    They made enormous concessions that in some instances, 
their tariffs were as high as 65 percent, reducing them to 10, 
11, 12 percent. And eliminating or expanding quotas, they gave 
up an enormous amount of access to their country.
    But even though this was bilaterally negotiated, that 
bilateral negotiation is superseded by the ultimate protocol 
for entry into the WTO. And whatever the concessions are that 
China gave in our bilateral negotiations actually have got to 
be worked together with whatever other concessions they 
negotiated with other nations and ultimately, the WTO panel 
will determine what the concessions are for entry into the WTO 
and we're out of it. We're completely out of it.
    The advantage to China is that they want to be in the WTO. 
And our bilateral negotiations with them, which became a 
framework for the consideration of the WTO panel for accession 
are a part of what will ultimately benefit them, in their view, 
because they want to be in the world trading order, they want 
to be respected as a member of the world trading order. They 
want to be members of the WTO. That is the benefit they get.
    And they believe that is worth a great deal to them. They 
have wanted to get into the WTO for quite a long number of 
years, and now they're about to achieve that. And there are 
innumerable, I think, benefits, and Secretary Rubin can correct 
me if I'm wrong, innumerable benefits that they believe will 
accrue to them just by being a member of the WTO.
    And I thank you for indulging me to just make that comment.
    Next on the list is Mr. Houghton.
    Mr. Houghton. No questions, thank you.
    Chairman Archer. Mr. Portman.
    Mr. Portman. Thank you, Mr. Chairman.
    I think that's an excellent point, that there are some 
benefits that may be more intangible, but similar to the 
benefits that Secretary Rubin mentioned are also in our 
interest. For us to have the ability to retaliate against China 
certainly is better than the situation we're in now. We're 
still going to have some enforcement problems, as we've seen 
with the Europeans and those countries that are closer to us in 
many respects. But at least we have them in a rule based 
organization.
    And the other point I'd like to make in response to Sandy's 
comment, Mr. Levin's comment, and also Mr. Kleczka's comment, 
is that if we don't engage with China, and this is a point that 
Chairman Archer made earlier in the dialogue with Ambassador 
Barshefsky, other countries will. And when you get to the 
investment issue, I look at my own district and products that 
we make that perhaps could be shifted over to China. And Mr. 
Levin talked about China being more competitive as a result of 
this.
    The Japanese, the Europeans and others will have the 
ability, if we don't move forward with NTR, to establish those 
same investments over there. And China will get what it wants. 
It will get the investment. It just won't get it from us. And 
it will make China, in that low wage rate you talked about, Mr. 
Kleczka, all the more competitive.
    But we won't be getting any benefit from it. So I think 
there are some answers to some of the concerns that have been 
raised by the UAW folks in my district and others, as to the 
investment issue, that go to the fact that we live in a global 
economy where we're not going to be able to control what other 
countries will do. Our lack of engagement doesn't mean that 
China won't get the investment and the exports that they won't. 
They will. It just won't be U.S. companies.
    And of course, if we aren't engaging, we don't get the 
benefits that we'd otherwise get, which is our economic 
benefits, which Secretary Rubin, you spelled out very well in 
your testimony. And then all the other benefits that are 
related to leverage on China, whether it's human rights or 
regional security issues or other matters.
    And I do see this as a seminal issue and one where we can 
really use the benefit of your knowledge and experience, Mr. 
Secretary. I'm delighted that you were willing to come here 
today and spend some of your time with us, even though you have 
moved to greener pastures. And much greener, as Mr. Rangel 
says. [Laughter.]
    Mr. Rubin. Well, maybe you'll give me stock options.
    Mr. Portman. Can I ask you a couple of questions? One is, 
and this is really a congressional question, I'll state a 
rhetorical question, I suppose. This whole notion of PNTR, and 
this is in response in part to Mr. Rangel's colloquy earlier 
with your successor and other Cabinet members, PNTR I think is 
a misnomer, just as MFN was. It's not P, it's just until the 
United States changes its mind based on China's behavior.
    And we will always have the ability, it's my understanding 
we will always have the ability as a Congress to exercise our 
discretion to determine that China has either conducted itself 
inappropriately in trade matters or in other matters including 
human rights matters, and revoke the normal trading relations 
that we engage with in China. We have the ability to vote on 
that any time, any year, one member as I understand it, under 
the WTO rules, would have the responsibility of raising that 
issue.
    But so long as one member does, the P in PNTR is just, as 
compared to the annual review. And this is not an undemocratic 
process with an undemocratic result. I just wanted to make that 
clear and make sure that you, Mr. Secretary, would agree with 
that.
    The second question I have, and it's really based on your 
background in international negotiations and your dealing with 
the leadership in China, is what do you think would happen if 
we were to pull the vote this year?
    Mr. Rubin. If you were not to vote this year?
    Mr. Portman. If we just throw up our hands and say, we just 
can't deal with this issue.
    Mr. Rubin. Oh, I think it has a number, at least in my 
view, has a number of ramifications, Mr. Portman. I think all 
of them are exceedingly negative.
    One thing, I think that there is a realistic possibility 
that China would go ahead, get access to the WTO and just 
exclude us from all the benefits. And as you very correctly 
pointed out, everyone else will take advantage of benefits and 
we'll soon be shut out, which is highly disadvantageous to us.
    I think the other thing is that you do have these competing 
forces within China over the question whether to reform or not 
to reform, whether to move forward or not to move forward. And 
I think that there would at least be a possibility of a 
terrible undermining of the reformist voices in China, which is 
exactly the opposite of what we should want to accomplish.
    And more broadly, I think that in respect to all of our 
interests, we have a real opportunity to do something that is 
of enormous importance. I think in many ways, this is probably 
about as important as anything that I was exposed to in the six 
and a half years I was in the Government. And I think it would 
be a terrible, terrible mistake for us not to move forward and 
take advantage of this.
    Mr. Portman. Not more important than the IRS oversight 
board, I hope.
    Mr. Rubin. It has its pluses and minuses. [Laughter.]
    Mr. Portman. Well, seriously, Mr. Secretary, that's a very 
powerful statement. And I appreciate again your willingness to 
engage yourself on this issue.
    Thank you, Mr. Chairman.
    Chairman Archer. Mr. Doggett.
    Mr. Doggett. Thank you, Mr. Chairman.
    Mr. Secretary, thank you. I generally share your 
perspective on the value of trade to our economy. But I do have 
some other concerns about the operation of the World Trade 
Organization and this agreement in particular.
    As you know, the President has made comments at Davos, at 
Seattle and at other places about the importance of greater 
openness and transparency in the operation of the World Trade 
Organization. Now that you're very much in the private sector, 
does the opening up of the decision making process of the World 
Trade Organization stand to benefit the business community here 
in the United States and around the world?
    Mr. Rubin. I think the Davos speech was a terrific speech 
on trade. It was very thoughtful and balanced, at least in my 
view.
    I think that transparency would benefit business. I think 
it would benefit everybody, because I think any time you have a 
more open process, as long as it doesn't become inefficient, 
ineffective, I think you're going to get better results.
    So my answer to your question is yes.
    Mr. Doggett. I know that there are so many multinationals, 
CitiBank, others, that are interested in seeing this China 
agreement approved this year. Is the business community taking 
any leadership role around the world in trying to encourage the 
WTO to open up its processes?
    Mr. Rubin. You know, that's an interesting question. I 
don't know the answer to that, but it's not a bad idea. Because 
I think that your basic point is the correct point. I think 
that would be in the interests of progress on trade and in the 
interest of American business.
    I don't know the answer but I think it's something that 
should be considered.
    Mr. Doggett. And I know at least in her written testimony, 
Ambassador Barshefsky has emphasized the fact that China would 
be, for the first time, subject to the WTO dispute resolution 
process. But to the extent that's all done secretly, it doesn't 
provide quite the assurance that we would have if we knew it 
were being done openly.
    Mr. Rubin. I think you've got an interesting point. It's 
enormously in the American interest that we have open 
processes. I think it really is enormously in our interest. I 
think that's something we can pursue. It's a good idea.
    Mr. Doggett. Last November, the President also issued an 
executive order, as you're probably familiar, to require 
environmental reviews with reference to our trade agreements.
    Mr. Rubin. Yes.
    Mr. Doggett. What role should we have relative to the 
environment in our trade relationships, whether it's China or 
beyond?
    Mr. Rubin. My view is that we have a tremendous self-
interest in all countries, but the issue comes most to the fore 
in developing countries, in having strong environmental 
protection regimes. Because the problems, you know better than 
I do, the problems that develop in these countries don't only 
affect those countries. Unfortunately, they affect us as well.
    So when a rainforest gets ripped down, it affects the 
atmosphere, the environment, it affects us. So I think that we 
should be pursuing environmental protection around the world. 
Whether or not trade agreements are an effective or appropriate 
mechanism for doing that is a separate question. But I think we 
have a tremendously strong self-interest in good environmental 
protection elsewhere.
    Mr. Doggett. Should environment be a factor at all in trade 
policy?
    Mr. Rubin. I guess that my--I don't know the answer to 
that. I think that's a legitimate question and I think we'll 
have to work our way through it. I'm not sure I have a view on 
that.
    Mr. Doggett. Thank you very much.
    Chairman Archer. Secretary Rubin, thank you very much. It's 
a pleasure to have you back here. I hope you will return again 
in the near future.
    Mr. Rubin. Mr. Chairman, thank you. It's very nice to be 
with you and with Mr. Rangel and everybody else. Thank you.
    Chairman Archer. If our next panel will come to the witness 
table. The Honorable Elliott Abrams, Reverend Daniel Baida Su, 
John Kamm, Alan Reuther, Kyle Burns and David Laux.
    Welcome, gentlemen. And in accordance with the rules of the 
Committee, your entire printed statements, without objection, 
will be inserted into the record. And the Chair would encourage 
you to limit your verbal presentations to five minutes, if at 
all possible. And we're happy to have all of you with us. And 
Mr. Abrams, if you'd be good enough to start off.
    Let me also ask each of the witnesses to identify yourself 
for the record before you present your testimony.
    Mr. Abrams.

    STATEMENT OF HON. ELLIOTT ABRAMS, MEMBER, UNITED STATES 
COMMISSION ON INTERNATIONAL RELIGIOUS FREEDOM (FORMER ASSISTANT 
SECRETARY, INTERNATIONAL ORGANIZATION AFFAIRS, FORMER ASSISTANT 
 SECRETARY, HUMAN RIGHTS AND HUMANITARIAN AFFAIRS, AND FORMER 
ASSISTANT SECRETARY, INTER-AMERICAN AFFAIRS, U.S. DEPARTMENT OF 
                             STATE)

    Mr. Abrams. Thank you, Mr. Chairman.
    I'm Elliott Abrams and I'm here on behalf of the United 
States Commission on International Religious Freedom, of which 
I have the honor to be a member.
    Let me begin by thanking you for the invitation to testify. 
And I would like to submit the full statement, including the 
Commission's recommendations, for the record. The Commission, 
as you know, was established by Congress in 1998 in the 
International Religious Freedom Act, which charged us with the 
responsibility of advising the President, Secretary of State 
and Congress on matters involving international religious 
freedom. Just two days ago, we issued our first annual report.
    The Commission has nine voting members who come from both 
parties and several religions. And several of us are strong 
free traders. Yet the vote was a unanimous 9-0 in our report, 
asking Congress not to grant permanent NTR for China at this 
moment. Let me read the reasoning that was stated in our 
report.
    The Commission believes that in many countries, including 
some of China's neighbors, free trade has been the basis for 
rapid economic growth, which in turn has been central to the 
development of a more open society and political system. This 
belief has been a major factor for the annual decision by 
presidents and congressional majorities of both parties to 
grant MFN to China over the past two decades.
    However, given the sharp deterioration in freedom of 
religion in China during the last year, the Commission believes 
that an unconditional grant of PNTR at this moment maybe taken 
as a signal of American indifference to religious freedom. The 
Government of China attaches great symbolic importance to steps 
such as the grant of PNTR, and presents them to the Chinese 
people as proof of international acceptance and approval.
    A grant of PNTR at this juncture could be seen by Chinese 
people struggling for religious freedom as an abandonment of 
their cause at a moment of great difficulty. We therefore 
believe that Congress should grant PNTR to China only after 
China makes substantial improvements for freedom of religion.
    Now, what led us to this unanimous conclusion? Freedom of 
religion in China is under attack. The situation today is worse 
than it has been since the cultural revolution. The underlying 
conditions are very bad. Persecution of Catholics loyal to the 
Pope and of Protestant groups operating outside of government 
supervision, the so-called house churches, persecution of 
Muslims in Xinjiang, all intensified. Churches and religious 
schools throughout the country were destroyed over the last 
year. Worshipers continue to be detained, beaten, jailed.
    Efforts to tighten control over Chinese Catholics were 
increased. Bishop Yan Weiping was detained in May 1999 while 
performing mass and was found dead on the street shortly after 
being released from detention. A number of Catholic bishops 
remain under detention. Scores of Protestant house church 
leaders and worshipers have been detained.
    I think you're all familiar with the situation in Tibet. 
Within the last year, about 1,000 monks and nuns were expelled 
from their monasteries. And you're all familiar with the 
situation of Falun Gong.
    So we concluded that the passage of PNTR at this juncture 
would send a powerful message to Beijing that we don't much 
care about all of this, unless some additional things are done 
first. We believe China should be asked to make some 
substantial steps toward improving respect for freedom of 
religion, measured in ways like the start of a serious 
bilateral dialogue with us on freedom of religion.
    They have signed the international covenant on civil and 
political rights, two years ago, but never ratified it, and 
could be asked to ratify it. We should be getting access, the 
international community should, to religious leaders under 
detention. They should be responding to requests for 
information. Things like this are not extreme proposals.
    We've also asked for some steps by the U.S. Government 
first, before you vote. That you undertake intensive and 
continuing monitoring of human rights in China. That we 
continue to press in the U.N. Human Rights Commission each 
year. That you invite the Dalai Lama, a symbol of religious 
freedom and non-violence, to speak to a joint session.
    That we lead a campaign to seek the release of China's 
religious leaders imprisoned or under house arrest. That the 
United States oppose the holding of the Olympic Games in China 
while these kinds of religious freedom conditions are extent 
there.
    My time is running out, Mr. Chairman, so I would just say 
one final thought. This vote is not a surprise. The government 
of China has known it was coming for a long time, as we all 
have. Yet during this very year when you're voting, they have 
unleashed a vast campaign of religious repression. What were 
they thinking, that we didn't care, that none of us cared? That 
Congress would pay no attention to this? That no matter how 
many bishops they put in jail, no matter how many churches they 
bulldozed, there would be no effect on us?
    It appears that is what they thought. And we call upon you 
to prove that they were wrong, and to insist first on progress 
with respect to religious freedom. We think if the vote is put 
off until there is some sign of progress that you will be 
sending a message of strength and principle that will have 
enormous and beneficial impact on China.
    And we thank you again, Mr. Chairman, for this opportunity 
to testify on behalf of the Commission.
    [The prepared statement follows:]

STATEMENT OF THE HON. ELLIOTT ABRAMS, MEMBER, UNITED STATES COMMISSION 
ON INTERNATIONAL RELIGIOUS FREEDOM (FORMER ASSISTANT SECRETARY, 
INTERNATIONAL ORGANIZATION AFFAIRS, FORMER ASSISTANT SECRETARY, HUMAN 
RIGHTS AND HUMANITARIAN AFFAIRS, AND FORMER ASSISTANT SECRETARY, INTER-
AMERICAN AFFAIRS, U.S. DEPARTMENT OF STATE)

Mr. Chairman and Members of the Committee:

    On behalf of the United States Commission on International 
Religious Freedom, of which I have the honor to be a member, I 
wish to thank the Committee for this invitation to testify 
about the granting of permanent normal trade relations to 
China.
    The Commission, established by Congress in the 
International Religious Freedom Act of 1998, is charged with 
the responsibility of advising the President, the Congress, and 
the Secretary of State on matters involving international 
religious freedom. Just two days ago we issued our first annual 
report. The Commission has nine voting members who come from 
both political parties and several religions--and several of us 
are strong free traders. Yet we were unanimous in our Report in 
asking Congress not to grant PNTR to China at this moment. Our 
reasoning is stated in our Report:
    The Commission believes that in many countries, including 
some of China's neighbors, free trade has been the basis for 
rapid economic growth, which in turn has been central to the 
development of a more open society and political system. This 
belief has been a major factor for the annual decision, by 
presidents and congressional majorities of both parties, to 
grant ``most favored nation'' (MFN) trade relations with China 
each year over the past two decades. Moreover, a grant of PNTR 
and Chinese membership in the World Trade Organization may, by 
locking China into a network of international obligations, help 
advance the rule of law there in the economic sector at first, 
but then more broadly over time.
    Nevertheless, given the sharp deterioration in freedom of 
religion in China during the last year, the Commission believes 
that an unconditional grant of PNTR at this moment may be taken 
as a signal of American indifference to religious freedom. The 
government of China attaches great symbolic importance to steps 
such as the grant of PNTR, and presents them to the Chinese 
people as proof of international acceptance and approval. A 
grant of PNTR at this juncture could be seen by Chinese people 
struggling for religious freedom as an abandonment of their 
cause at a moment of great difficulty. The Commission believes 
that Congress should not approve PNTR for China until China 
makes substantial improvements in respect for religious 
freedom.. . .''
    What happened in China to lead us to this unanimous 
conclusion? The very limited religious freedom Chinese enjoyed 
in the past is under attack. The situation is worse than at any 
time since the Cultural Revolution.
    The underlying conditions are clear. They have been 
reported by the State Department and by many human rights 
organizations in detail, and are summarized in the Staff 
Memorandum for the Chairman that accompanies our own annual 
report and is posted on the Commission's web site, 
www.uscirf.gov.
    Here are some highlights:
     Religious freedom is denied to the people of 
China, and the right to educate one's children in one's 
religion is denied. In January, Premier Zhu Rongji and others 
gave speeches stressing the importance of controlling all forms 
of religious activity.
     Using the ``anti-cult'' provisions of the Criminal 
Code, thousands of Chinese in Falun Gong and other groups were 
beaten and arrested this past year because the Chinese regime 
found their spiritual and religious activity to be a political 
threat. Some have received long prison terms. Millions of 
religious books have been burned. It is worth adding that this 
crackdown clearly violates China's promises to respect 
internationally-guaranteed rights to freedom of religion.
     The regime continues to forbid freedom of religion 
in Tibet, and continues its suppression of Tibetan Buddhism and 
its punishment of any expression of religious loyalty to the 
Dalai Lama. This past year, another key religious figure, the 
Karmapa Lama, fled into exile. Over 1,000 monks and nuns were 
expelled from their monasteries in 1999, and over 11,000 have 
been expelled since 1996. Monks and nuns who resist re-
education are still being jailed and tortured, and last year 
three monks in their twenties died from injuries suffered in 
prison.
     Persecution of Catholics loyal to the Pope, and of 
Protestant groups operating outside government supervision, the 
so-called ``house churches,'' and of Muslims in Xinjiang, was 
intensified. Churches and religious schools established without 
prior approval were destroyed. In 1999 and this year, 
worshipers continued to be detained, beaten, jailed, and fined. 
Efforts to tighten control over Chinese Catholics were 
increased, and many Catholic clergy loyal to the Vatican have 
been detained in recent months. Bishop Yan Weiping was detained 
in May 1999 while performing mass and was found dead on a 
street shortly after being released from detention. A number of 
Catholic bishops remain under detention. In January 2000 the 
government had the official Catholic church ordain five new 
bishops without the approval of the Vatican or local dioceses; 
two of them replaced bishops detained by the government in 
1999. Scores of Protestant ``house church'' leaders have been 
detained.
    The Commission concluded that passage of PNTR at this 
juncture would send a powerful message to the government of 
Beijing that we don't much care about all of this--and perhaps 
as tragically, send the same message to millions of Chinese 
believers struggling to practice their religion.
    We therefore believe that the U.S. Congress should not 
approve Permanent Normal Trade Relations for China until China 
makes substantial improvements in respect for religious 
freedom, as measured by the following standards:
     establishment of a serious dialogue with the 
United States on religious freedom concerns;
     ratification by China of the International 
Covenant on Civil and Political Rights, which it signed in 1998 
but has never ratified;
     access to religious leaders, including those under 
detention, for international human rights organizations, by the 
Commission itself, and respected international human rights 
organizations;
     detailed responses by the Chinese government to 
inquiries about individuals known to be imprisoned for reasons 
of religion or belief;
     and the release from prison of all persons 
incarcerated for religious reasons.

    We also ask the following of our own government:
     that you in Congress hold annual hearings on human 
rights in China;
     that the United States continue to press 
resolutions about human rights in China each year in the UN 
Human Rights Commission, and do it seriously and at the highest 
level;
     that you invite the Dalai Lama, an international 
symbol of religious freedom and non-violence, to address a 
joint session;
     that the US help lead a campaign to seek the 
release of Chinese religious leaders imprisoned or under house 
arrest;
     that the United States raise the profile of 
conditions for Uighur Muslims in Xinjiang, in diplomatic 
discussions and in Uighur language radio broadcasting;
     and finally that until significant progress has 
been made in religious freedom and human rights in China, the 
United States should use its influence to ensure that China not 
be selected as the site for the Olympic Games.
    The full text of the Commission's recommendations on China 
in its May 1, 2000 Report follows this statement.
    Mr. Chairman, the state of religious freedom in China is 
poor and is deteriorating. To repeat our unanimous conclusion,
    ``Given the sharp deterioration in freedom of religion in 
China during the last year, the Commission believes that an 
unconditional grant of PNTR at this moment may be taken as a 
signal of American indifference to religious freedom.. . .A 
grant of PNTR at this juncture could be seen by Chinese people 
struggling for religious freedom as an abandonment of their 
cause at a moment of great difficulty. The Commission therefore 
believes that Congress should not approve PNTR for China until 
China makes substantial improvements in respect for religious 
freedom.. . .''
    Mr. Chairman, on my own behalf and on behalf of all the 
members of the U.S. Commission on International Religious 
Freedom, I thank you for this opportunity to appear here today.
    The following is the China section of the Recommendations 
of the United States Commission on International Religious 
Freedom in its May 1, 2000 Annual Report

                   B. The People's Republic of China

1. Background on China

    The government of China and the Communist Party of China 
(CPC) discriminate, harass, incarcerate, and torture people on 
the basis of their religion and beliefs. Chinese law 
criminalizes collective religious activity by members of 
religious groups that are not registered with the state. It 
registers only those groups that submit to membership in one of 
the government-controlled associations affiliated with the five 
officially recognized religions. Members of registered 
religious groups can only engage in a limited range of what the 
state deems ``normal'' religious activities.
    The religious and belief communities that resist 
registration or that have been denied permission to register, 
including Catholics loyal to the Pope and Protestants who 
worship in ``house churches,'' have no legal standing in China. 
Adherents are often harassed, detained, and fined. Meetings are 
broken up, unauthorized buildings are destroyed, and leaders 
are arrested and frequently imprisoned.
    Over the past several years, Chinese officials have been 
employing increasingly strict laws and regulations as 
instruments to harass religious groups and maintain control 
over religious activities. Officials responsible for enforcing 
the strict laws continue to be guided by CPC policy directives 
on religion. Furthermore, the Chinese legal system does not 
protect human rights from state interference, nor does it 
provide effective remedies for those who claim that their 
rights have been violated. Thus, this Commission finds that 
even though the Chinese government modified its means of state 
control by moving to a system of regulation of religion 
according to law, it has not improved the conditions of 
religious freedom in China.
    The right to freedom of religious belief is explicitly 
denied to the 60 million members of the CPC, and the 3 million 
members of the Chinese military, and to hundreds of millions of 
minors under the age of 18, whose education the government 
monopolizes.
    The new ``anti-cult'' provision of the Criminal Code is 
being used to impose long prison sentences on leaders of the 
Falun Gong and Zhong Gong spiritual movements as well as 
Protestant house church leaders.
    Chinese authorities exercise tight control over Tibetan 
Buddhist monasteries, select and train important religious 
figures, and wage an invasive ideological campaign both in 
religious institutions and now among the Tibetan people 
generally.
    Chinese authorities similarly exercise tight control over 
the Uighur Muslims in Xinjiang in northwest China. There are 
credible reports of thousands of arbitrary arrests, the 
widespread use of torture, and extra-judicial executions.
    This Commission concludes that the practices of the Chinese 
government and the CPC with respect to freedom of religion and 
belief violate the standards of the Universal Declaration of 
Human Rights and the International Covenant on Civil and 
Political Rights (ICCPR). Each of these international 
instruments prohibits discrimination on the basis of religion 
or belief, and the Universal Declaration and the ICCPR protect 
the right to hold and to manifest beliefs. The government of 
China, however, imposes undue restrictions on the manifestation 
of beliefs and bans several beliefs altogether.

2. Commission Recommendations on China

    In light of the preceding description of the situation in 
China, the Commission makes the following recommendations:

 Recommendation 2.1: Permanent Normal Trade Relations (PNTR) with China

    As of May 1, 2000, the date on which the Commission is 
releasing this report, China has applied for entrance into the 
World Trade Organization (WTO), a multilateral organization 
including the United States and other industrialized countries. 
As a part of the admission process, the WTO established a 
``Working Party on the Accession of China,'' a task force that 
oversees the consideration of China's application to join the 
WTO. The Working Party is responsible for drafting a Protocol 
for the accession of China and for monitoring a series of 
bilateral market-access agreement negotiations between China 
and 37 members of the WTO (including the United States and the 
European Union). Although conclusion of these bilateral 
agreements is not strictly necessary for obtaining WTO 
membership, such agreements establish the terms of the trade 
relations, on a bilateral basis, between China and the WTO 
members with whom it enters into the bilateral agreements. 
China and the United States signed a bilateral accession 
agreement in 1999, although China is not bound by the agreement 
unless the United States grants China PNTR status. As of April 
28, the European Union and several other members, unlike the 
United States, have not concluded their bilateral discussions 
with China. After China agrees to an accession Protocol with 
the Working Party, China will likely receive a sufficient 
number of votes from WTO members to permit it to join. The U.S. 
Congress currently is scheduled to vote on the question of 
whether to grant PNTR status to China within the next few weeks 
(currently scheduled for the week of May 22).
    The Commission believes that in many countries, including 
some of China's neighbors, free trade has been the basis for 
rapid economic growth, which in turn has been central to the 
development of a more open society and political system. This 
belief is the basis for the annual decision, by presidents and 
congressional majorities of both parties, to grant ``most 
favored nation'' (MFN) trade relations with China each year 
over the past two decades. Moreover, a grant of PNTR and 
Chinese membership in the World Trade Organization may, by 
locking China into a network of international obligations, help 
advance the rule of law there in the economic sector at first, 
but then more broadly over time.
    Nevertheless, given the sharp deterioration in freedom of 
religion in China during the last year, the Commission believes 
that an unconditional grant of PNTR at this moment may be taken 
as a signal of American indifference to religious freedom. The 
government of China attaches great symbolic importance to steps 
such as the grant of PNTR, and presents them to the Chinese 
people as proof of international acceptance and approval. A 
grant of PNTR at this juncture could be seen by Chinese people 
struggling for religious freedom as an abandonment of their 
cause at a moment of great difficulty. The Commission therefore 
believes that Congress should not approve PNTR for China until 
China makes substantial improvements in respect for religious 
freedom, as measured by the following standards:

2.1. The U.S. Congress should grant Permanent Normal Trade 
Relations status to China only after China makes substantial 
improvements in respect for freedom of religion, as measured by 
the following standards;

2.1.a. China agrees to establish a high-level and ongoing 
dialogue with the U.S. government on religious-freedom issues.

    China's policy on treatment of religious exercise and 
religious groups is dictated by the Chinese Communist Party 
through its United Front Work Department (UFWD). This policy is 
implemented by the national and local offices of the Religious 
Affairs Bureau (RAB).

    Since May of 1999, no dialogue on religious freedom or 
other human rights has taken place between the United States 
and any level of the Chinese government. The RAB has refused to 
meet with U.S. embassy personnel or even to receive official 
communications. Obviously, this closed door policy in Beijing 
is not conducive to bilateral communication or improvement in 
religious freedom for the Chinese people.
    The Commission recommends that the first condition for 
granting PNTR be the reestablishment of direct, ongoing, and 
constructive dialogue between high-level United States and 
Chinese officials on freedom of religion and belief. The 
dialogue should include officials within the UFWD.
    In addition to official dialogue between governments on 
religious-liberty issues, the U.S. government should press 
Beijing to allow contacts, official and unofficial, between and 
among various religious groups in China and their counterparts 
in the United States. This communication can only increase 
understanding in both countries of the similarities and 
differences in conditions for religious liberty in each 
country.

2.1.b. China must agree to ratify the International Covenant on 
Civil and Political Rights.

    China is the only member of the UN Security Council that 
has not ratified the ICCPR. In anticipation of President 
Clinton's trip to China in 1997, China signed the ICCPR in 
1998. Ratification of the ICCPR would demonstrate to the world 
and the people of China that the government takes seriously its 
role as a member of the international community.

2.1.c. China must agree to permit unhindered access to 
religious leaders, including those imprisoned, detained or 
under house arrest, by the U.S. Commission on International 
Religious Freedom and respected international human rights 
organizations.

2.1.d. China must provide a detailed response to inquiries 
regarding a number of persons who are imprisoned, detained, or 
under house arrest for reasons of religion or belief, or whose 
whereabouts are not known but who were last seen in the custody 
of Chinese authorities. The Department of State, after 
consultation with human rights and religious groups, should 
compile a detailed list of such prisoners of conscience and 
make specific inquiries to the Chinese government.

    China has detained thousands of religious practitioners, 
many in the ``reeducation through labor'' (laojiao) system. 
Using its laws against ``cults,'' the government recently 
prosecuted scores of religious leaders and gave them prison 
sentences as long as 18 years. At least seven Roman Catholic 
bishops who have refused to join the relevant governmental 
association have been arrested and remain imprisoned or have 
not been seen in public since. In 1997, a delegation to China 
of three American clerics (including now-Commissioner 
Archbishop Theodore McCarrick), asked to meet with several 
leaders (such as James Su Zhimin, Bishop of Hebei), but Chinese 
authorities refused to permit it.
    Shen Yiping and Zheng Suqian were imprisoned for their 
leadership of large Protestant ``house churches'' in 1999. 
Thousands of practitioners of Falun Gong have been detained and 
more than 300 have been sentenced, including one leader to 18 
years. Within the Tibetan Buddhist community, the Dalai Lama's 
choice for the Panchen Lama--a child named Gendun Choekyi 
Nyima--has not been seen since 1995, and numerous monks and 
nuns remain in prison in Lhasa.

2.1.e. China must release from prison all persons incarcerated 
for religious reasons.

    Needless to say, the Commission believes that all prisoners 
incarcerated for reasons of religion or belief should be 
released immediately. The very least the government of China 
should be required to do before PNTR is granted is to free 
those who are minors and those whose health is poor.

Recommendation 2.2: Steps the U.S. Congress Should Take Before Granting 
                                  PNTR

    Before granting PNTR to China:

2.2.a. The U.S. Congress should announce that it will hold 
annual hearings on human rights in China.

    The Commission believes that congressional monitoring of 
human rights conditions in China should be intensive and 
continuous. If normal trade relations are to be permanent, so 
should congressional monitoring of human rights conditions in 
China be permanent. Toward this end, the Commission urges 
Congress to hold annual hearings for monitoring Chinese human 
rights performance. Congress should announce this initiative 
before PNTR is granted, while the issue is still visible and 
while both proponents and opponents of PNTR are espousing the 
importance of monitoring and leveraging improvements in human 
rights in China. The full Senate Committee on Foreign Relations 
and House Committee on International Relations should plan 
regular, in-depth hearings (to be held at least annually).

2.2.b. Congress should invite the Dalai Lama to address a Joint 
Session of Congress.

    The Dalai Lama is an international symbol of religious 
freedom and non-violence. A congressional invitation to address 
a joint session would honor him and the cause of religious 
freedom at a moment when that cause is under attack in China. 
Such an invitation would demonstrate continuing Congressional 
concern and a firm resolve never to abandon freedom of religion 
as a central human right. The Commission therefore urges that 
Congress issue the invitation as soon as possible.

   Recommendation 2.3: UN Human Rights Commission Resolution on China

    The Commission believes that China should be censured annually by 
the UN Commission on Human Rights (UNCHR) as long as the government's 
treatment of religious communities falls dramatically short of the 
standards of the UN Declaration on Human Rights and the ICCPR.
    Since 1990, the United States has sponsored a resolution on China 
in the UNCHR every year except 1998. The UNCHR has voted to take no 
action on those resolutions every year except in 1995. On only two 
occasions, in 1995 and 2000 (the only two years that the UNCHR came 
close to debating the United States' resolution on China) did the 
Administration make an early and concerted effort to push for the 
resolution. China, on the other hand, lobbies UNCHR member countries 
year-round, dispensing aid and favors in return for commitments that 
the members will support a ``no action'' motion each year at the UNCHR.

2.3. Until religious freedom significantly improves in China, the U.S. 
government, led by the personal efforts of the President of the United 
States, should initiate a resolution to censure China at the annual 
meeting of the UN Commission on Human Rights and should support a 
sustained campaign to convince other governments at the highest levels 
to support it.

    The U.S. government should decide by October of each year--six 
months before the UNCHR vote in April--whether a resolution condemning 
China's human rights performance is warranted. If so, the 
Administration should coordinate all appropriate agencies in a 
sustained campaign to enlist the support of UNCHR member countries.
    Even with a six-month lead time, a U.S. resolution will likely 
continue to fail in Geneva unless the President makes its adoption a 
high priority of the Administration. At the 2000 meeting of the UNCHR, 
the Secretary of State and the Assistant Secretary for Democracy, Human 
Rights and Labor pressed hard for passage of the resolution, but the 
unsuccessful result shows that presidential involvement is clearly 
needed. The Commission urges the President personally to solicit 
support for the resolution from the governmental leaders of UNCHR 
member countries. Indeed, this year the Commission urged the President 
to increase his involvement in the final days leading up to the vote. 
The importance that the United States places on passage of the 
resolution would not be lost if the President were to address the UNCHR 
in Geneva. The success or failure of this referendum on China's 
standing in the international community is likely to depend on whether 
the President makes liberal use of the ``bully pulpit'' and effective 
diplomacy at every opportunity.

    Recommendation 2.4: International Campaign for Prisoner Release

    As discussed above, the PRC government routinely arrests and 
incarcerates religious practitioners of unofficial churches or illegal 
``sects'' in ``reeducation through labor'' camps for up to three years, 
and imprisons religious leaders for long sentences. The current victims 
include Roman Catholic Bishop Su Zhimin, and a number of other bishops 
and priests, Falun Gong leaders, House Church leaders, Gendun Choekyi 
Nyima (the Panchen Lama designated by the Dalai Lama), and members of 
the Muslim Uighur community who have been imprisoned for their 
religious belief, association or practice.
    Multilateral overtures to the Chinese government comprise the most 
promising means of liberating some of these individuals.

2.4. The United States should lead a multilateral campaign to seek the 
release of Chinese religious leaders imprisoned or under house arrest.

    All diplomatic means should be used to effect the release of those 
Chinese religious leaders who are imprisoned, who have not been seen in 
public since their detention, or who are under house arrest.
    The means employed should be the full range of diplomatic tools--
from private demarches to UN Security Council resolutions to 
presidential statements. Every meeting of U.S. embassy personnel with 
the Chinese government should include prominent mention of our 
government's profound concern for the welfare of these religious 
leaders and a request that they be released.

   Recommendation 2.5: Measures to Enhance Freedom of Uighur Muslims

    The residents of Xinjiang province are the only Chinese who 
are subject to capital punishment for political crimes. That 
apparently is intended to suppress the separatist movement of 
the Uighur people in that province, a movement that sometimes 
apparently involves violence. But one reported result of the 
government's heavy-handed policy toward Xinjiang is the 
limitation of religious exercise by nonviolent Uighur Muslims.
    Because the Chinese government vigorously suppresses the 
flow of information from Xinjiang, and because the Uighur 
people are not well-known and lack a large international 
constituency (in contrast to the Tibetan Buddhists), the 
Commission recommends that the U.S. government enhance their 
visibility, in the hope of relieving their religious exercise 
of current strictures.

2.5. The U.S. government should raise the profile of conditions 
in Xinjiang by addressing religious-freedom and human rights 
concerns in bilateral talks, by increasing the number of 
educational exchange opportunities available to Uighurs, and by 
increasing radio broadcasts in the Uighur language into 
Xinjiang.

    The Commission recommends that the State Department raise 
the status of Xinjiang toward the same level presently enjoyed 
by Tibet. The religious freedom of Uighur Muslims in that 
province should be made a priority agenda item in discussions 
with the Chinese government. American diplomats should also 
raise the plight of the Uighurs on a bilateral basis with other 
countries, particularly Islamic governments, and urge them to 
pursue the issue in their own discussions with Beijing.
    In addition, the Commission recommends that the U.S. 
government increase the number of educational and cultural 
exchange opportunities available to Uighurs.
    The Commission further recommends that the U.S. government 
devote more attention and resources to documentation of the 
situation in Xinjiang.
    Finally, the Commission believes that religious freedom 
would be promoted in Xinjiang by increasing the flow of 
information via radio in the Uighur language, through, for 
example, Radio Free Asia.

         Recommendation 2.6: China's Hosting of Olympic Events

2.6. The U.S. government should use its diplomatic influence 
with other governments to ensure that China is not selected as 
a site for the International Olympic Games until it has made 
significant and sustained improvement in religious freedom and 
human rights.
    [Attachment is being retained in the Committee files.]
      

                                


    Chairman Archer. Thank you, Mr. Abrams.
    Our next witness is Reverend Su. Welcome and after you 
identify yourself, you may proceed.

STATEMENT OF REVEREND DANIEL BAIDA SU, SPECIAL ASSISTANT TO THE 
 PRESIDENT, CHINA OUTREACH MINISTRIES, INC., FAIRFAX, VIRGINIA

    Reverend Su. Thank you, Mr. Chairman and members of the 
Committee, for the opportunity to testify here regarding the 
PNTR to China. My name is Daniel Su, and I represent China 
Outreach Ministries, based in Fairfax, Virginia. We are 
committed to reaching out to graduate students from China. 
There are about 50,000 of them right here in the United States.
    Last Saturday, when the White House called me to ask for my 
view on the issue, I commended the President on his vision to 
integrate China into the world community. Despite my honest 
disagreement with the President on many issues, I do strongly 
agree with him that granting PNTR to China is the right thing 
to do for both the American and the Chinese people.
    Aside from the obvious economic benefits for both 
countries, I believe that there are other compelling reasons to 
support China's PNTR and WTO membership. First, as a clergyman 
concerned about religious freedom and human rights, I am 
particularly excited that a WTO agreement would initiate a 
dynamic process of change in China with far-reaching 
consequences. It would greatly contribute to creating a 
conducive environment for promoting international norms, the 
rule of law and individual rights and freedom.
    The WTO agreement obligates China to play by the rules. In 
the process, China will need to strengthen its legal 
institutions, train more legal professionals, and educate its 
people about the concepts of rights, law and international 
norms. This process in itself is a breakthrough with important 
philosophical implications for China as a nation.
    When a Chinese realizes that he has certain rights as a 
businessman the government should not violate, then more likely 
he will also realize that he has other rights as a human being. 
In following the WTO norms, Beijing government is openly 
acknowledging the authority and legitimacy of the international 
norms, rather than accusing the United States of interfering 
with China's internal affairs.
    If China learns to abide by the WTO rules, then you will 
more likely learn to abide by other international norms in the 
universal declaration of human rights.
    Second, the WTO agreement will accelerate China's economic 
reform, especially its privatization process. It will set more 
people free from government intrusion into their lives, and 
enable them to live as freer men and women. It will speed up 
the free flow of information and expose the Chinese people to 
more ideas and values which could be potentially revolutionary.
    In its last annual report on human rights, the State 
Department takes note of the increasing personal freedoms in 
China. Some China trade critics are quick to argue that 
increasing freedoms is not intended by Beijing government, and 
therefore, it shouldn't get a credit. I cannot agree more. 
Their argument proves exactly the point, the need to do more 
trade with China. It proves the dynamics of the free market in 
creating freedoms, even freedoms unintended by the government.
    How can the same critics stand in the name of human rights, 
use the same argument against free trade with China? Why kill 
the process that already is creating freedoms for people we say 
we care about?
    Finally, to grant PNTR to China is to strengthen the 
reformists there. Reformists in China have fought hard to 
commit Beijing to a WTO agreement. China's current reform has 
its limits and has reached a critical stage where it's 
confronted with daunting changes such as massive unemployment 
and native unrest. Besides there are strong forces in China 
trying to derail the reform process.
    To grant PNTR to China and to bring it into WTO is to 
provide a cover and momentum the reformers need to jump start 
their reform and to bring it to a complete success. To deny 
China's PNTR is to abandon China's reformers in this critical 
battle. To do that is to unwittingly play into the hands of the 
Hunan communists. That would be a major setback for China's 
reform and is bad news for America.
    Despite my arguments for granting PNTR to China, I want to 
acknowledge that PNTR is not a magic weapon that will somehow 
bring China to democracy. There are no such magic weapons, and 
it will likely take a long process for China to be democratic. 
However, in considering the PNTR vote, these are some of the 
good questions to ask. If we grant PNTR to China, does that 
help it get on the right track toward a rule of law and 
improvements of human rights? Will the Chinese and American 
people be better off as a result? Will it help China play a 
more responsible role in the international community? I believe 
the answer is yes.
    I share the deep frustrations you all feel about China's 
human rights situation. I personally have friends in China who 
are in prison now for human rights reasons. Religious people 
and political dissidents still find their basic rights limited 
and violated in various ways. With or without PNTR for China, 
we should always continue to work hard to address these 
concerns. But it is counterproductive to deny China's PNTR 
because of its poor human rights record. That would be like 
denying food to a child because he is too weak and skinny.
    I myself feel the urge to want to seize every conceivable 
opportunity to send China a message. It would make me feel 
good, but what good does it accomplish for people in China? 
When we send a message, we also need to ask, at what cost? Is 
it worth it if it causes a major setback in China's reform 
process? Is it worth it if it costs us this strategic 
opportunity to move China in the right direction?
    I don't believe it is. Especially when we know there are 
other existing channels to send a message that's not 
counterproductive. And we can always create new, effective 
channels.
    Which direction do we want China to go? That's what's at 
stake in this PNTR vote. There are no guarantees that China 
will go the direction we desire. But it's my conviction that 
granting PNTR to China and its WTO membership gives us the best 
hope that China may become a more humane and responsible 
country.
    I am hopeful and my prayers are with you as you consider 
this very important vote. Thank you very much.
    [The prepared statement follows:]

Statement of Reverend Daniel Baida Su, Special Assistant to the 
President, China Outreach Ministries, Inc., Fairfax, Virginia

    Mr. Chairman and members of the Committee, thank you for 
the opportunity to testify today regarding granting Permanent 
Normal Trade Relations (PNTR) to China.
    Please allow me to briefly introduce myself first. I was 
born and raised in China. Despite my Buddhist family 
background, I chose to become a Christian in China's house 
church movement, which Beijing government still considers 
illegal and is therefore subjected to various degree of 
suppression and even persecution. Currently I work for China 
Outreach Ministries, an evangelical Christian organization 
headquartered in Fairfax, Virginia. Our organization is 
committed to reaching out to the 50,000 Mainland Chinese 
graduate students, scholars and their families currently on US 
campuses.
    Regarding PNTR for China, when the White House called me 
last Saturday to ask for my view on the issue, I commended the 
President for his vision and leadership in trying to integrate 
China into the world community through PNTR and the WTO 
agreement. Even though I cannot honestly say I share his views 
in all issues, I strongly agree with him that granting PNTR to 
China is the right thing to do for both the American and 
Chinese people. Aside from the obvious economic benefits for 
both countries, I believe there are other compelling reasons to 
support China's PNTR and accession to the WTO.
    First, as a clergyman concerned about religious freedom and 
other human rights issues in China, I am particularly excited 
that the WTO agreement will initiate a dynamic process of 
change in China with far reaching consequences. It will greatly 
contribute to creating a conducive environment for promoting 
international norms, the rule of law and individual rights and 
freedom.
    The WTO agreement obligates China to play by the rules. In 
the process, China will need to strengthen its legal 
institutions, train more legal professionals, learn to follow 
international legal procedures, and educate its people about 
the concept of rights, law and international norms. This 
process alone is a breakthrough with important philosophical 
implications for China as a nation. When a Chinese realizes 
that he has rights as an investor that government should not 
violate, then more likely he will also realize that he has 
other rights as a human being. In going through this process 
Beijing government is openly acknowledging the authority and 
legitimacy of international norms rather than accusing the 
United States for ``interfering with China's internal 
affairs.'' If China learns to abide by the WTO rules, then it 
will more likely learn to abide by other international norms 
such as the ``UN Declaration of Human Rights.'' This will be a 
major step forward toward the rule of law.
    Second, the WTO agreement will accelerate China's economic 
reform, especially its privatization process, giving more 
freedoms to the people. It will set more people free from 
government intrusion into their lives and enable them to live 
as freer men and women. It will speed up the free flow of 
information and expose the Chinese people to more ideas and 
values, which could be potentially revolutionary.
    In its last annual report, the State Department takes note 
of the increase in personal freedoms in China on one hand and 
deterioration in human rights on the other. Some China trade 
critics are quick to argue that the increase in personal 
freedoms are not intended by Beijing government. I cannot agree 
more, for that exactly proves the amazing dynamics of the free 
market--its power to create results even unintended by 
government. However, when the same critics in the name of 
freedom use the same argument against trade with China, then I 
cannot disagree more! Why kill the market process that's 
creating more freedoms for the people we say we care about?
    Finally, to grant PNTR to China is to strengthen the 
progressive reformers in China, for China's reformers have 
worked hard to bring Beijing to the WTO agreement. China's 
current economic reform has its limit and has reached a 
critical stage. Among many daunting challenges China is facing 
are massive unemployment and labor unrest. There are strong 
forces in China trying to derail the reform process. To grant 
PNTR to China and to bring it into WTO is to provide the cover 
and momentum the reformers need to bring their reform to a 
successful completion. To deny China's PNTR is to abandon 
China's reformers in this critical battle and unwittingly play 
into the hands of the hard-line communists. That would be a 
major setback for China's reform efforts.
    Despite my arguments for granting PNTR to China, I want to 
acknowledge that PNTR is not the magic weapon that will somehow 
bring democracy to China. There are no such magic weapons, and 
it will likely take a long process for China to become truly 
democratic.
    However, in considering the PNTR vote, among the relevant 
questions to ask are: If we grant PNTR to China, does that help 
it get on the right track toward the rule of law and 
improvement of human rights? Will the Chinese and American 
people be better off as a result? Will it help China play a 
more responsible role in the international community? I believe 
the answer is a resounding yes.
    I understand that there are frustrations about China's 
human rights record. Unregistered Christians, other religious 
minorities, and political dissidents still find their basic 
rights deprived or even violated in different ways. With or 
without PNTR for China, we should continue to work hard to 
address these concerns. But to deny PNTR to China because it 
has poor human rights record is like denying food to a child 
because he is too skinny. That would be counterproductive.
    Which direction would we encourage China to go? That's 
what's at stake in this PNTR vote. There is no guarantee that 
China will go the direction we desire, but it's my conviction 
that granting PNTR to China and its membership into the WTO 
gives us the best hope that China will move toward greater 
openness, rule of law, respect for human rights and other 
international norms. Thank you.
      

                                


    Chairman Archer. Thank you, Reverend Su.
    Mr. Kamm, we'd be pleased to receive your testimony.

STATEMENT OF JOHN KAMM, EXECUTIVE DIRECTOR, DUI HUA FOUNDATION, 
                   SAN FRANCISCO, CALIFORNIA

    Mr. Kamm. Mr. Chairman, Mr. Rangel, distinguished members 
of the Committee. My name is John Kamm. I'm the Executive 
Director of The Dui Hua Foundation, a San Francisco-based non-
profit organization that seeks to narrow differences between 
the United States and China in the area of human rights. I also 
direct the Program in Human Rights Diplomacy at Stanford 
University.
    An important part of my foundation's unofficial dialogue 
with the Chinese government is the Prisoner Information 
Project, a unique program with China's Ministry of Justice 
through which we keep track of detainees convicted of national 
security offenses by Chinese courts. I have been doing this 
work for 10 years, since I first came before this committee: 
uncovering names of prisoners, assembling them into lists, 
submitting the lists to the Chinese government, urging detailed 
responses and circulating the information.
    My foundation, with grant support from Smith Richardson 
Foundation and the International Republican Institute, is 
carrying out the first comprehensive survey of Chinese 
publications to uncover the names of political and religious 
prisoners. We have thus far found more than 500 names of 
prisoners unknown outside China. And I have already asked the 
Chinese government already to account for more than 100 of 
them. I will travel to Beijing later this month as part of this 
effort.
    We urge greater leniency and encourage transparency, a 
quality of governance that will be promoted by China's 
accession to the WTO.
    Let me tell you about one of the cases I'm working on. A 
young worker by the name of Liu Baiqiang was serving a sentence 
for robbery. He condemned the killings of June 4th, 1989 from 
his cell, and for this he was resentenced to a term of 17 
years. That was in 1989.
    In 1994, his case came to light. I began asking the Chinese 
government questions about him. The following year, he received 
his first sentence reduction. In 1996, he received another. 
Then in 1999, Amnesty International spotlighted his case. He 
received another sentence reduction.
    In the five years before his case was known, he received no 
sentence reductions. In the five years after his case became 
known, he received three reductions. In my statement, I cite 
many other examples of leniency extended to prisoners whose 
situations are brought to light. As many as half of such 
prisoners are released prior to the completion of their 
sentences. Far too long for exercising one's right to speech 
and association. But far shorter than it used to be.
    China has become more responsive to the concerns of the 
international community. It hasn't moved fast enough to respect 
human rights, and new problems surface every day. But the 
Chinese government no longer dismisses all expressions of 
concern as interference in its internal affairs. And it 
regularly releases prisoners and takes other steps to improve 
its image or secure its diplomatic goals. Making concessions in 
the area of human rights arises from the country's effort to 
become a part of the world community and to take its place in 
the community of nations. China's acceptance of international 
standards will gain impetus with its joining the WTO and by 
Congress granting China permanent normal trade relations.
    Some worry that by granting China PNTR, the United States 
will lose leverage. The annual renewal debate, however, no 
longer provides us with leverage. I cannot think of a single 
human rights gesture in the last six years that the Chinese 
government has made to obtain annual renewal. I go into this 
further in my statement, but I do believe that the debate has 
become counterproductive to the goals it once sought to 
promote.
    This doesn't mean we have no leverage. China is a poor but 
proud country, and it will always want something. China has 
applied to host the 2008 Olympic Games, and the decision on who 
will host them will be made next summer. Next year, the United 
States will have a new president. And the Chinese government 
will want to make friends with whoever that is. We need to take 
full advantage of these opportunities.
    As China joins the world community, there will be many 
opportunities to prod its government to improve its human 
rights record. Do we have the tools to exploit these 
opportunities? We have some, and we can fashion others. I go 
into some ideas for human rights initiatives in my statement 
and I will be happy to discuss those further.
    China's accession to the WTO, and this Congress' granting 
of PNTR in that context, will ultimately be good for human 
rights in China. And legislation granting PNTR should be voted 
on as a clean bill.
    Milan Kundera once wrote that the struggle of man against 
power is the struggle of memory against forgetting. The work of 
remembering China's forgotten prisoners has been made possible 
by the opening of channels of communication between the United 
States and China. And the success or failure of this work 
depends on the overall development of relations between the two 
countries.
    I urge you to pass legislation granting China PNTR, 
allowing American companies and workers and their counterparts 
in China to enjoy the benefits of a more open and responsible 
China. Thank you, Mr. Chairman.
    [The prepared statement follows:]

Statement of John Kamm, Executive Director, Dui Hua Foundation, San 
Francisco, California

    Ten years ago, I was Chairman of the American Chamber of 
Commerce in Hong Kong, and Vice President of a large 
multinational corporation producing and trading chemicals in 
the Far East. That year -1990--was the first year of the 
national debate over whether or not to renew China's most-
favored-nation (MFN) trade status, something we now refer to as 
``normal trade relations (NTR).'' I came to Washington and 
testified before this committee and before the House Foreign 
Affairs Committee in favor of renewing MFN. The record will 
show that I was among the first witnesses to come before 
Congress to argue against revoking China's tariff status. I 
haven't changed my position: I still believe that one of the 
worst things this country could do regarding human rights in 
China would be to terminate or curtail trade relations.
    Today the debate is not about whether to revoke China's 
NTR. It's about whether or not to grant China permanent NTR in 
the context of an agreement over China's entry into the World 
Trade Organization (WTO) negotiated by the United States Trade 
Representative and signed in Beijing last November. After 10 
years of renewing MFN and NTR year after year, no one--not even 
the leader of the AFL-CIO who recently said that we should keep 
China ``on probation''--believes that Congress will revoke 
China's NTR. The debate is now between perpetual NTR and 
permanent NTR; regardless of the outcome of this debate, China 
will enjoy exactly the same access to the US market as it 
enjoys today. Its tariffs will not change whether or not 
Congress votes to give China permanent NTR. I believe the time 
has come to grant China permanent NTR (hereafter PNTR) not only 
because China's accession to the WTO and the granting of PNTR 
will yield human rights benefits for the Chinese people, 
especially those who are pursuing legal and political reform, 
but also because it will clearly benefit the people of the 
United States as well.
    When I employed human rights arguments to make the case for 
MFN 10 years ago, my credentials were challenged. I was a 
business leader, what did I know of human rights? I felt the 
challenge was valid, so I publicly and deliberately made a 
commitment to this chamber to use my relationships in and 
knowledge of China to lobby the Chinese government on behalf of 
prisoners of conscience. That commitment has been honored. My 
work is my testimony. In 10 years I have made more than 50 
trips to Beijing to raise the cases of individuals believed to 
have been detained for the non-violent expression of their 
political and religious beliefs. I have worked on hundreds of 
cases with a dozen different Chinese ministries and provincial 
governments.
    In 1995, I established the Prisoner Information Project, a 
unique program with China's Ministry of Justice for keeping 
track of Chinese prisoners. Last year I established a 
foundation whose principal task is to uncover the names of 
hitherto unknown prisoners and put them on lists that are then 
submitted to the Chinese government with requests for 
information on their present status. With the support of Smith 
Richardson Foundation and the International Republican 
Institute, the Dui Hua Foundation has already uncovered more 
than 500 names of detainees previously unknown to foreign 
governments and non-governmental organizations. The Chinese 
government has begun responding to these new lists of names, 
and is continuing the responses to the old lists.

           Annual Renewal of NTR and the Question of Leverage

    The Chinese government is willing to make concessions to 
win PNTR, but it is no longer willing to make concessions to 
obtain annual renewal, or what might be called perpetual NTR. 
China's leaders stopped making concessions to win annual 
renewal when they concluded that China wouldn't lose MFN and 
its successor, NTR. Instead of making concessions in the run-up 
to annual renewal, the Chinese government is more inclined to 
strike hard at its domestic opponents. This trend began in the 
summer of 1992, when the Beijing Intermediate People's Court 
tried and convicted Bao Tong, the highest-ranking Communist 
Party official accused of June 4 related offenses, and then 
publicized his conviction, hours before the House voted on MFN. 
With a few exceptions since then (notably the 1993 release of 
Xu Wenli, who is now back in prison, and the 1994 releases of 
Wang Juntao and Chen Ziming), Beijing has used the occasion of 
the debate and vote on annual renewal to demonstrate to its 
people that it is not afraid of the United States, that it will 
not make concessions to keep what it already has. It figures 
that Congress won't revoke what most Americans who have studied 
the question see as non-discriminatory tariffs that form the 
basis of a normal trade relationship.
    Some feel that the United States will lose leverage if we 
grant China PNTR. What leverage? I challenge those who think 
the annual debate helps dissidents in China to name one 
prisoner who has been released from prison or one other human 
rights concession that has been made during the last six years 
to obtain annual renewal. The game has changed. Prisoners will 
be released, lists answered, covenants signed, dialogues held 
and rights delegations hosted for other purposes: to influence 
an Olympics games bid, to ensure a pleasant visit by a state 
leader to a foreign country, to ward off resolutions at United 
Nations meetings and yes, to obtain PNTR, but not to obtain 
annual renewal. They already have NTR in perpetuity, and 
they're not going to lose it, so why make concessions for it?
    I for one don't have a problem using China's desire to gain 
something it doesn't have to win concessions in the area of 
human rights. China, after all, wants so many things. The list 
is inexhaustible, and changes from day to day. Most of all 
China wants the respect of the international community. It 
wants to be seen as a great power, a country with a proud and 
ancient civilization that seeks to assume its rightful place in 
the community of nations. It increasingly recognizes that, to 
accomplish this, it needs to abide by international standards, 
whether those standards apply to trade, arms control or human 
rights. For this reason I have long felt that the highest 
priority of our human rights diplomacy must be to convince 
China to ratify the two international human rights covenants 
that, together with the Universal Declaration on Human Rights, 
make up the international bill of rights. Ratification entails 
periodic reporting, and more importantly, the onerous task of 
defending one's record before the international community. I 
would trade the State Department's sponsorship of a resolution 
criticizing China at the annual meeting of the United Nations 
Human Rights Commission, an effort that has failed time and 
time again, in exchange for China's firm commitment to ratify, 
by a date certain, the International Covenant on Civil and 
Political Rights, and to file its first comprehensive report as 
a state party before the deadline set forth in that document.
    Are there things that the United States government could be 
doing that it is not presently doing to encourage greater 
respect for human rights in China? The answer is yes, and I 
will shortly put forward some suggestions. Before doing so, I 
want to make a few points.
    No program initiated by the United States government can, 
in and of itself, bring greater respect for human rights, 
democracy and rule of law to China. Achieving those goals is 
the responsibility of the people of China, to be achieved by 
means and through sacrifices they deem most appropriate and 
according to the timetable they think most realistic. The 
United States can help, but we can determine neither the course 
nor the timing of change in China. We can help by promoting 
transparency and accountability, a strengthened legal system 
that safeguards due process, and humanitarian treatment for 
those in prison who seek change through non-violent advocacy. 
And we can trade with and invest in their companies, bringing 
with us those core American values for which we as a people are 
respected around the world.
    Following from this and from what I said earlier about the 
absence of leverage arising from the debate on annual renewal, 
support for PNTR should not be made conditional on the 
identification and enactment of new tools to promote respect 
for human rights in China. Members should judge PNTR on its own 
merits or lack thereof. Is granting China PNTR good for the 
United States? Will China's accession to the WTO be good for 
the people of China and will it bring about a China better 
integrated into the world community? To decide these questions 
other than by examining them on their own merits is to engage 
in a dangerous game of self-deception, to falsely entertain the 
notion that we are giving up something whose worth is proven in 
exchange for something whose value is not known.
    Legislation granting China PNTR should be unencumbered by 
extraneous conditions and side agreements that might or might 
not pass the other chamber of Congress. Congress has been 
debating the issue of China's trade status for more than ten 
years. The time has come for an up or down vote. If members 
want to consider new tools to prod China in the directions we 
want it to move, let those tools be judged on their own, cooly 
and in the fullness of time, just as both sides have had ample 
time to examine the question of MFN and NTR.

                    New Initiatives on Human Rights

    Let me now turn to some initiatives that the United States 
can undertake, initiatives that do not necessarily involve 
trade sanctions and that are not directly related to PNTR but 
whose success is made more likely by the passage of PNTR.
    I come well prepared for this part of my testimony. I've 
been coming up with ideas for new human rights initiatives for 
much of the last ten years. In fact, four years ago I 
circulated a list of ten possible initiatives to members of 
Congress and the administration. I am attaching a copy of that 
list, typographical errors and all, to today's statement to 
this committee (see Attachment One).
    Many of you will notice ideas with which you've become 
familiar. In fact, several of the initiatives have found their 
way into legislation and been enacted into law, including the 
establishment and maintenance of a prisoner information 
registry and the increase in the number of human rights 
monitors in American diplomatic missions in China. Radio Free 
Asia (RFA) is up and running. The President has gone to China 
and lobbied the government to release the old 
counterrevolutionaries, a proposal I know to be popular with 
reformers in the country. At least five members of Congress, in 
separate bills over the past six years, have suggested the 
creation of commission modeled on the Commission on Security 
and Cooperation in Europe.\1\. Although the President has 
apparently abandoned the code of business principles for 
companies operating in China, a detailed code of conduct has 
been drafted and agreed to by non-governmental organizations 
and companies doing business in China (see Attachment Two).
---------------------------------------------------------------------------
    \1\ The idea of a China human rights commission modeled on the CSCE 
was first proposed by former Congressman Lee Hamilton in his May 1994 
``US--China Policy Act.'' The commission was to be called ``The 
Commission on Law and Society in the People's Republic of China'' and 
it was to monitor the development of China's legal system, the 
emergence of civil society and the development of institutions that 
provide humane and effective government. The Senate did not take up 
consideration of the act. The following year, former Congressman Jim 
Lightfoot (R-Iowa) managed to insert report language into the House 
version of the foreign operations appropriations bill directing the 
Secretary of State to examine the feasibility of developing a 
``Commission on Human Rights in the Pacific'' whose functions and 
methods of operation would be modeled on the congressionally 
established Commission on Security and Cooperation in Europe. There is 
no evidence that the State Department undertook the feasibility study.
    Senator Joseph Lieberman (D-Connecticut), in his ``US--China 
Relations Act of 1997,'' directed the President to appoint a 12-member 
Human Relations Commission made up of individuals from the executive 
branch, the legislative branch and the private sector. The commission 
would assess the status of human rights and worker rights in China, and 
in the event that the commission assesses that progress is not being 
made, make recommendations to strengthen policies towards China. To 
help assess the status of rights in China, the commission would 
establish a prisoner information registry.
    In the same year, Senator Spencer Abraham (R-Michigan), in his 
China Policy Act of 1997, called for the President and the Secretary of 
State to initiate negotiations with the governments of China and other 
countries in Asia to establish a commission that would be modeled on 
the Commission on Security and Cooperation in Europe. In January 1999, 
Senator Tim Hutchinson (R-Arkansas) inserted virtually identical 
language into the Senate version of Defense Appropriations Bill, but 
the language was stripped out of the final conference bill.
---------------------------------------------------------------------------
    Common to all of these initiatives is the idea that the 
United States should take steps to encourage transparency in 
China's legal system, something that the process of WTO 
accession will help immeasurably. Before making things more 
transparent in the area of the legal and penal systems, we need 
to invest in the people and resources to insure effective 
monitoring, to get at the truth in as much detail as possible. 
We can then go about acting on and publicizing the truth 
through such means as diplomatic demarches, Congressional 
hearings, the annual reports on human rights in China and 
programs broadcast on VOA and RFA.

              The 1999 State Department Authorization Bill

    Last November, Congress passed and President Clinton signed 
into law the Consolidated Appropriations Act. This massive 
piece of legislation included the State Department 
Authorization Bill, two sections of which are relevant to 
today's deliberations: Section 872, which provides $2.2 million 
for additional personnel at our diplomatic missions in China to 
monitor human rights, and Section 873, which calls on the 
Secretary of State to establish and maintain a registry to 
``provide information on all political prisoners, prisoners of 
conscience and prisoners of faith in the People's Republic of 
China.''
    Six months have passed since these ideas were translated 
into law, but I regret to say that little has been done either 
to enhance monitoring by our missions or to establish the 
registry. Members might ask themselves why we should consider 
coming up with new initiatives to address human rights concerns 
if those that are enacted into law are ignored by the executive 
branch. It shouldn't be necessary for me to give reasons why 
greater monitoring and better accounting are desirable, but, 
given the lack of follow-up, I'm compelled to do so.
    Insofar as monitoring by our diplomats is concerned, the 
number of personnel currently tracking human rights 
developments in China is woefully inadequate for the tasks 
expected of them. The State Department's country report on 
human rights in China has grown in length and detail year by 
year, and its contents and conclusions are employed extensively 
by Congress in practically every discussion of policy toward 
China. In addition to the country report, diplomats with human 
rights responsibilities are largely responsible for compiling 
and analysing the information that goes into the religious 
freedom report and the report on Hong Kong. They are so 
burdened with report writing that they cannot undertake such 
tasks as attending meetings with Chinese officials in charge of 
policies affecting religion and freedom of information, 
collecting materials on laws and regulations affecting human 
rights, searching out local legal journals and newspapers that 
provide the raw material for discovering new names and cases, 
and meeting with dissidents and their families. If the day 
comes when China allows international observers at its trials--
another goal of our human rights diplomacy in China--we won't 
have the people in the field to attend them unless Section 872 
is implemented.
    The country report on human rights is a valuable document, 
but it can be improved and made more valuable. It is especially 
important to draw distinctions about human rights conditions in 
different parts of the country, and by doing so to encourage 
``human rights competition'' among provinces and 
municipalities. Based on the work I do in China, I am certain 
that local leaders are aware of the importance of cultivating a 
more open and humane image. I know of specific prisoner 
releases and other positive developments that have taken place 
because of concerns over a locality's image abroad. Identifying 
those parts of China that are the most tolerant and the most 
open will also help American businesses decide where to invest.
    As for the mundane and often denigrated task of compiling 
and presenting prisoner lists, let me make it clear that I 
think this enterprise is the single most important activity 
American officials, politicians, activists and business leaders 
can undertake to promote respect for human rights in China.\2\ 
Why? Doing so demonstrates in the clearest terms America's 
respect for the integrity and dignity of the individual. 
Showing concern for lowly and obscure prisoners, not just the 
``big names'' who for the most part have already been released, 
tells the Chinese government a lot about our priorities. Most 
important, as I said above, it is the Chinese people who will 
ultimately win greater respect for human rights, rule of law 
and democratic processes. Surely this great enterprise is 
impeded and delayed if those who are most willing to champion 
change are locked away in prison. Raising the names of those 
imprisoned for the non-violent advocacy of their political and 
religious beliefs hastens the day of their release and return 
to their local communities to work for change.
---------------------------------------------------------------------------
    \2\ The State Department's attitude towards submitting prisoner 
lists to China has been ambivalent. In 1998, it declined to endorse the 
proposal to establish a prisoner information registry (see testimony of 
Assistant Secretary of State Stanley O. Roth before the Senate Foreign 
Relations Committee, Subcommittee on Asia and the Pacific, June 8, 
1998).
    Prisoner lists were submitted to Chinese officials by former 
Secretary of State James Baker in May 1991 and by Assistant Secretary 
of State John Shattuck in October 1993. In June 1994, shortly after 
President Clinton's decision to de-link MFN renewal from human rights 
imposed the previous year, I was told by a senior official attached to 
the American Embassy in Beijing that the State Department was ``getting 
out of the prisoner list business,'' but in January 1995, John Shattuck 
presented a list to his Chinese counterparts on the occasion of the US-
China bilateral dialogue on human rights. The 1995 list had 25 names on 
it, compared to more than 200 names on the 1993 list.
    Shortly after the 1995 bilateral dialogue, Beijing suspended future 
official dialogues on human rights, citing the State Department's 
sponsorship of a resolution criticizing China at the meeting of the 
United Nations Human Rights Commission in Geneva.
    In 1998 the United States did not put forward a resolution in 
Geneva, and in January 1999 another round of bilateral human rights 
talks were held. A brief list of ``illustrative cases'' was presented. 
Soon after the meeting, the State Department decided to once again 
sponsor a China resolution in Geneva. In May, the bombing of the 
Chinese Embassy in Belgrade occurred, and Beijing once again suspended 
the official dialogue. The Chinese government is not presently 
accepting lists of prisoners or demarches on prisoners prepared by the 
State Department or the American Embassy in Beijing, but a Chinese 
spokesman, at a news conference in Beijing on April 20, indicated a 
willingness to resume the official dialogue on human rights if the 
United States takes ``certain steps.''
    When submitted, lists prepared by American officials and political 
leaders are often flawed: names are misspelled, Chinese characters are 
not provided, individuals who have committed acts of political violence 
are mixed in with those convicted of non-violent expression, and those 
who've already been released are listed with those still in prison. The 
lists sometimes contain phrases like ``political prisoners'' or 
statements like ``believed to have been tortured'' that make it 
difficult for Chinese officials to accept much less respond. In 
compiling lists, the State Department and other agencies, as well as 
members of Congress, tend to rely on recommendations from one or two 
non-governmental human rights organizations (NGOs). No NGO has produced 
a comprehensive listing of Chinese political and religious prisoners in 
almost five years, and NGO databases are badly in need of updating and 
rationalization. Virtually no independent research to uncover the names 
of Chinese prisoners in primary sources has been undertaken by the US 
government, nor have resources readily available to the State 
Department, like field reports from consulates, photographs of court 
notices or even transcripts of interviews with individuals seeking 
political asylum, been surveyed to identify new cases and names.
    When an official Chinese response or some other document containing 
information on prisoners is obtained by one agency of government it is 
usually not shared with others. There is currently no central 
repository of information. Communication of information on Chinese 
prisoners is particularly bad between and among members of Congress and 
the administration. The US government has not sought information on 
Chinese prisoners obtained by other governments through their dialogues 
with China.
---------------------------------------------------------------------------
    This is not conjecture on my part. Prisoner intervention 
works--not always, and not as quickly as we'd like--but the 
evidence is clear that prisoners about whom the international 
community expresses concern are more likely to secure early 
release and better treatment than those who are forgotten or 
unknown. Let me share with you results from two efforts to 
engage the Chinese government in a dialogue on its prisoners.

     The Complaints Procedure of the ILO's Committee on Freedom of 
                              Association

    The International Labor Organization (ILO), a body to which 
China and the United States belong, has submitted, through its 
Committee on Freedom of Association, inquiries into the 
situations of jailed Chinese labor leaders to the Chinese 
government. The lists of these prisoners are drawn up by the 
International Confederation of Free Trade Unions (ICFTU), of 
which the AFL-CIO is an active member, and the lists are 
presented as part of complaints alleging violations of the 
freedom of association by the Chinese government. Six formal 
complaints covering scores of prisoners have been made since 
1990.
    I recently visited ILO headquarters in Geneva as part of a 
study, supported by a grant from Smith Richardson Foundation, 
of the prisoner accounting efforts of governments and non-
governmental organizations. I was told that, by virtue of its 
membership in the ILO, China is obligated to respond to 
complaints made by the ICFTU and submitted through the Freedom 
of Association Committee. In the opinion of the ILO's senior 
officers, the Chinese government has made a good faith effort 
to provide information on the prisoners named in the 
complaints. I was provided with a complete set of the 
complaints and the Chinese responses.
    In example after example, the Chinese government has 
reduced the sentences of important labor leaders about whom the 
ICFTU has filed complaints and such groups as Amnesty 
International have expressed concern. Let me cite a few of the 
most striking examples: Chen Gang and Guo Yunqiao, leaders of 
the Worker's Autonomous Federations of Hunan Province, were 
sentenced to death for their involvement in the June 1989 
disturbances. Their death sentences have been commuted and they 
are serving out 11 year and 13-year sentences, respectively. 
Peng Shi and Liu Zhihua of the same province were sentenced to 
life; they are now serving out 10 and 11-year sentences, 
respectively. Mao Yuejin, another worker's leader from Hunan, 
was sentenced to 15 years' imprisonment in 1989. He has been 
released. Tang Yuanjuan and Li Wei of Changchun were released 
early by court orders that overturned their original sentences 
of 20 and 13 years, respectively. Labor leaders Li Wenming and 
Guo Baosheng of Guangdong Province were convicted of subversion 
by a court in Guangdong Province, a crime that carries a 
minimum of 10 years' imprisonment. Prompt intervention by the 
international community, led by the ICFTU and the AFL-CIO, 
resulted in sentences of three-and-a-half years with credit for 
time served. Both have been released.
    To show that the benefits of intervention are not 
necessarily restricted to those specifically named in 
complaints and inquiries, consider the example of Mu Wenbin. 
This hitherto unknown prisoner was tried at the same time and 
by the same court as Li Wenming and Guo Baosheng. He too was 
convicted of subversion, but the court exercised its discretion 
and sentenced him to five years. I have been advised that Mu 
will be released next month.
    The experience of the ILO reinforces the belief that, if 
China can be persuaded to ratify the international human rights 
covenants, it will honor its reporting obligations, permitting 
a degree of international scrutiny well beyond what is 
currently possible.

The Prisoner Information Project

    Other evidence of the efficacy of intervention can be 
obtained from an examination of the results of my foundation's 
Prisoner Information Project. (For a complete account of this 
effort see ``The Prisoner Information Project: A Status 
Report,'' testimony before the Subcommittee on Asia and the 
Pacific of the Committee on International Relations of the 
House of Representatives, April 30, 1998.)
    In 1995, China's Ministry of Justice agreed to accept from 
me four lists of 25 names of Chinese citizens believed to have 
been imprisoned for the non-violent expression of their 
political and religious beliefs, and to make a good faith 
effort to provide information, in a standardized format, on 
their situations. Shortly after providing information on the 
first list of names, the ministry suspended the project in 
response to the State Department's decision to grant Lee Teng-
hui, then president of Taiwan, a visa to come to the United 
States. I continued to submit lists of names, however, and by 
the end of the year the ministry had in its possession three 
lists totaling 75 names.
    The ministry refused to provide the promised information 
until the eve of President Jiang Zemin's state visit to the 
United States in October 1997. In the interim between the 
submission of lists in 1995 and the resumption of the project 
in 1997, I and friends in Congress, including Congressman 
Phillip Crane of this committee, pressed the Chinese government 
to live up to its commitment, resubmitting the ``List of 75'' 
over and over again. Within the Chinese government, those 75 
people became some of the best-known prisoners in the country.
    To date, the Ministry of Justice has provided information 
on a total of 47 names on the ``List of 75.'' (In April 1999, 
China's cooperation with the project was suspended for a second 
time on account of the State Department's sponsorship of the 
China resolution at the UN Human Rights Commission meeting. The 
ministry resumed providing information six weeks ago in 
conjunction with congressional hearings on PNTR.) Subtracting 
people for whom no records have been found (it is likely that 
these individuals did not serve sentences in prisons), those 
sentenced to reeducation camps (all of whom have been released) 
and those who had already been released at the time I filed the 
inquiry, we are left with 31 names of prisoners who the 
Ministry of Justice has confirmed were serving prison terms at 
the time inquiries were filed in 1995.
    I am attaching a table that summarizes what has happened to 
these 31 prisoners (see Attachment Three). To date, at least 
17, have benefited from early release or reduction of sentence. 
They include well-known and little known prisoners, and they 
hail from all parts of China.
    More evidence that intervention on behalf of prisoners is 
effective comes from Guangdong, China's most open and 
progressive province. I have maintained a dialogue on prisoners 
with local authorities in the province for several years. Since 
1995, I have filed inquiries on a quarterly basis on all 
individuals known or suspected to be in prison. Of 12 people 
known by me to be in prison during the five-year period that 
ended in December 1999, all but three have had their sentences 
reduced or had sentences imposed that were below the minimum 
sentence prescribed by law. Six of these nine prisoners have 
been released and another is due for release next month (see 
Attachment Four).
    In most instances where the Chinese government has reduced 
a prisoner's sentence or released a prisoner on parole in the 
last five years, the outside world has found out months if not 
years after the event. Prior to 1995, the State Council 
Information Office promptly advised me, by fax, when releases 
were made. As pointed out above, the Chinese government no 
longer makes human rights concessions to win annual renewal of 
normal trade relations. Beijing's refusal to publicize what 
outsiders would consider good news demonstrates its 
unwillingness to give so much as the impression that 
concessions are being made.

           A Congressional-Executive Branch China Commission

    As noted above, a number of members of Congress have made 
proposals to establish a Congressional-executive branch 
commission modeled on the Commission on Security and 
Cooperation in Europe. The commission would monitor 
developments in China in the areas of human rights, trade and 
national security, report on these developments and make 
recommendations on how to best address problems. Congressman 
Levin is said to be working on such a proposal. As a long-time 
supporter of the concept of such a commission, I am eager to 
learn more about the Congressman's proposal, a proposal which 
should be examined on its own merits and, as argued above, not 
as a bill tied to PNTR.
    Let me here suggest a job for the commission: It should act 
as the repository of letters from members of Congress to the 
Chinese government about prisoners, and letters sent in reply 
by the Chinese government. At present, Senators and 
Representatives frequently write letters to the Chinese Embassy 
expressing concern for and requesting information on Chinese 
prisoners. Often, these letters are answered, and important 
information is provided--even hints as to how one might lobby 
for early release. Even though Beijing has suspended the 
official dialogue with the United States on human rights, it 
has not stopped responding to members' letters on prisoners. I 
have seen one letter from the Chinese Ambassador concerning two 
imprisoned house church preachers that was written less than 
two weeks after the tragic bombing of China's Belgrade embassy. 
I have read others that discuss Tibetan prisoners who rank 
among China's most sensitive cases.

                   The Prisoner Information Registry

    The registry called for in Section 873 of last year's State 
Department Authorization Bill will draw on many sources as it 
builds and maintains a comprehensive database. There will be 
unofficial sources, chiefly information obtained from non-
governmental organizations like Human Rights in China, Human 
Rights Watch Asia, Amnesty International, the Tibet Information 
Network and the Information Center on Human Rights and 
Democracy in China. Each of these NGOs maintains its own 
databases, and each has its own strengths from which the State 
Department might benefit.
    There will be official sources of information, consisting 
of oral and written replies by the Chinese government to 
prisoner lists submitted by foreign governments and United 
Nations bodies \3\ , by individuals acting in semi-official 
capacities like the three religious leaders who visited China 
in early 1998, and by such groups as The Dui Hua Foundation. 
Special attention should be paid to the collection of police 
and court documents, especially detention notices, arrest 
warrants, bills of prosecution, and verdicts handed down by 
courts.
---------------------------------------------------------------------------
    \3\ The Chinese government is currently engaged in official 
dialogues on human rights with the European Union, Canada, Australia, 
the United Kingdom, France, Norway and Sweden. As an integral part of 
these dialogues, China accepts lists of prisoners and provides 
information on them. China appears reluctant, however, to respond to 
lists submitted by countries with whom it does not have a dialogue. The 
German Chancellor submitted a list of imprisoned journalists to Chinese 
officials during his November 1999 visit to China, but, six months 
later, no response had yet been given.
    Chinese Premier Zhu Rongji, on two occasions during his visit to 
the United States in April 1999, quipped that foreign leaders do not 
think that a visit to China is complete unless they're able to hand 
over a list of Chinese prisoners.
    In 1990, the Chinese representative to the United Nations Human 
Rights Commission declared that ``China has consistently sent factual 
replies and information, including those concerning the 'June 4th 
incident,' in a responsible manner, to the relevant UN bodies.'' It has 
indeed provided information on its detainees to the mechanisms of the 
United Nations Commission on Human Rights, including the Working Group 
on Arbitrary Detention (which visited China in October 1997), the 
Working Group on Enforced or Involuntary Disappearances, the Special 
Rapporteur on Extrajudicial, Summary or Arbitrary Execution, the 
Special Rapporteur on Religious Intolerance (who visited China in 
November 1994) and the Special Rapporteur on Torture, who is 
negotiating with the Chinese government on a possible visit to the 
country. As noted in the statement, the Chinese government has provided 
a considerable amount of information to the International Labor Office, 
a UN-affiliated organization
---------------------------------------------------------------------------
    Accounts of political cases can be found in officially 
authorized newspapers, legal journals, yearbooks, collections 
of cases, provincial records, and county gazetteers. The Dui 
Hua Foundation, with grants from Smith Richardson Foundation 
and the International Republican Institute, is conducting the 
first-ever comprehensive search of such publications held in 
libraries in Hong Kong. In the space of seven months of 
research that began in September 1999, 320 cases involving 785 
detainees were uncovered, of whom two-thirds are not documented 
in foreign governmental or non-governmental databases. To date, 
three collections of cases covering 135 detainees have been 
published by the foundation, and these compendia form the basis 
of prisoner lists being submitted to the Chinese government. (I 
have brought copies of these collections with me today.) 
Compiling and submitting a prisoner list based on information 
released in China's own officially approved publications has 
obvious implications for the promotion of transparency.
    The State Department's prisoner information registry will 
be a valuable tool for the conduct of American human rights 
diplomacy in China. It will enable delegations from Congress to 
bring with them lists tailor-made for their itinerary and for 
the government ministries that they will meet. Similarly, the 
registry can be used to construct lists to be presented to 
visiting Chinese officials. It will aid in the process of 
identifying and differentiating conditions in different 
provinces, enriching our human rights reports and encouraging 
human rights competition. It will aid those American scholars 
undertaking rule of law programs in China to identify cases 
that can serve as precedent (e.g., where speech is dissident 
but ruled protected,\4\ and where their Chinese counterparts 
might have erred in the application of Chinese and 
international law (e.g., where individuals are convicted by 
retroactive application of supplementary regulations.\5\ The 
registry will also be useful to international humanitarian 
organizations seeking access to Chinese security detainees, and 
the knowledge contained therein will help push forward the 
President's suggestion to the Chinese government to review the 
sentences of people still serving sentences for 
counterrevolution, a crime struck from China's criminal 
statutes in October 1997.\6\
---------------------------------------------------------------------------
    \4\ An example of dissident but protected speech is that of Guo 
Yaotang, who in April 1990 painted anti-government slogans on his 
father's grave. His father had been executed for political offenses in 
1950. Guo was arrested and charged with counterrevolutionary incitement 
and propaganda, but the Henan courts decided that his slogans were not 
aimed at overthrowing the government. They ruled that the slogans 
reflected grief and dissatisfaction with the way his father's case had 
been handled, and were written during traditional activities to show 
respect for ancestors.
    \5\ A case worth raising is that of Wu Shishen, a Chinese 
journalist detained in October 1992 for the crime of illegally 
providing state secrets to foreigners. Wu was convicted in August 1993 
and sentenced to life imprisonment under supplementary regulations 
promulgated in April 1993, more than six months after the commission of 
the offense. The conviction is not only unsafe under Chinese law, but 
violates Article 15 paragraph one of the International Covenant on 
Civil and Political Rights.
    \6\ The Chinese government's position on the proposal for a general 
review of the sentences of counterrevolutionaries, conveyed to me in a 
letter from the Ministry of Justice dated April 17, 1998, is that while 
a general review is not possible under Chinese law, individuals 
convicted of counterrevolution can have their sentences reviewed ``on a 
case by case basis.''
---------------------------------------------------------------------------
    The business community in China can help collect 
information on cases for inclusion in the registry. I have 
written elsewhere of the monitoring role that companies can 
play.\7\ Encouraging companies to be more proactive in 
promoting respect for human rights in China has been an on-
again, off-again initiative of the administration. In 1994, a 
voluntary code of principles for businesses in China was 
promised, but it took two years for it to see the light of day. 
An award was created to honor companies that uphold these 
principles, but it has been granted only once--to my company, 
in June 1997. I'm told that even the website devoted to the 
award has been dismantled. Companies should be given 
incentives, including material incentives, to promote respect 
for human rights in the workplace and in the business 
environment as a whole. If businesses can lobby for lower 
taxes, they can and should lobby for freedoms of association, 
expression and belief. They are acting in their own self-
interest when they do so.
---------------------------------------------------------------------------
    \7\ See ``The Role of Business in Promoting Respect for Human 
Rights,'' statement of John Kamm to ``The OSCE at Twenty: Its Relevance 
to Other Regions,'' a seminar presented by the Commission on Security 
and Cooperation in Europe, Washington D.C., November 13-14, 1995.
---------------------------------------------------------------------------
    This testimony has touched on several initiatives that can 
be implemented in the area of human rights. We can increase the 
number of our diplomats doing rights work, and elevate rights 
concerns on the agenda of all high-level meetings. Our human 
rights reporting can be expanded and improved by implementing 
Sections 872 and 873 of last year's State Department 
Authorization Bill. It is vital that the State Department 
establish the prisoner information registry without further 
delay. A CSCE-style commission can be formed to provide a 
sharper focus and more resources to address human rights 
violations, and the business community can be encouraged to 
become more proactive in promoting human rights. New 
initiatives should be considered on their own merits, and not 
as ways of ``selling'' PNTR.
    That said, for initiatives in the area of human rights to 
produce results, the United States must remain engaged with 
China, and for that to happen, we need to make a success of the 
bilateral agreement on China's accession to the WTO. I urge you 
to pass legislation granting China PNTR.
                                                 John Kammm
    [Attachments 1 & 2 are being retained in the Committee 
files.]

                            Attachment Three
            Table 1: Status of Prisoners Asked About in 1995
------------------------------------------------------------------------
                                                             Summary:
                           Original                       Current Status
   No.        Name       Sentence and     Date Released    and Sentence
                       Date of Sentence                  Reductions (SR)
                          Completion                        on Record
------------------------------------------------------------------------
1)         Bai Weiji   10 years; May     Feb. 1999       Released early;
                        2002                              SR -3 years
                                                          and 3 months
------------------------------------------------------------------------
2)         Chen Gang   Life in prison;*  ..............  Due for release
                        changed to 18                     Nov. 2007; SR
                        years in 1992                     3 years.
------------------------------------------------------------------------
3)         Chen        13 years; Oct.    May 1994 and    Released twice
            Ziming      2002              Nov. 1996       on medical
                                                          parole
------------------------------------------------------------------------
4)         Gao Yu      6 years; Oct.     Feb. 1999       Released on
                        1999                              parole
------------------------------------------------------------------------
5)         Han Gang    12 years; July    ..............  Due for release
                        2001                              July 2001
------------------------------------------------------------------------
6)         Hao Fuyuan  10 years; June    July 1996       Released on
                        1999                              parole
------------------------------------------------------------------------
7)         Hu Liping   10 years; April   ..............  Due for release
                        2000                              April 2000
------------------------------------------------------------------------
8)         Jampa       13 years; Oct.    Oct. 1999       Released early;
            Ngodrop     2002                              SR -3 years
------------------------------------------------------------------------
9)         Li Junmin   Death with 2-     ..............  Due for release
                        year reprieve,                    in Dec. 2011
                        changed to 17
                        yrs. in 1994
------------------------------------------------------------------------
10)        Li Wei      13 years,         July 1997       Released early
                        changed to 8                      due to verdict
                        years in 1997                     being
                                                          overturned in
                                                          1997
------------------------------------------------------------------------
11)        Meng        10 years; June    April 1997      Released on
            Qingqin     1999                              parole
------------------------------------------------------------------------
12)        Phuntsog    9 years; 8 years  ..............  Due for release
            Nyidron     added in 1993                     in October
                                                          2007**
------------------------------------------------------------------------
13)        Ren         7 years; June     June 1996       Released at end
            Wanding     1996                              of term
------------------------------------------------------------------------
14)        Shi Xuezhi  Life, commuted    ..............  Due for release
                        to 16 yrs. in                     in April 2009
                        1993
------------------------------------------------------------------------
15)        Sun Liyong  7 years; April    April 1998      Released at end
                        1998                              of term
------------------------------------------------------------------------
16)        Sun         12 years; June    Feb. 1999       Released on
            Weibang     2002                              parole
------------------------------------------------------------------------
17)        Sun         18 years; Sept.   ..............  Due for release
            Xiongying   2009                              Sept. 2009
------------------------------------------------------------------------
18)        Tang        20 years,         ..............  In 1997 July
            Yuanjun     changed to 8                      1997 Released
                        yrs.                              early due to
                                                          verdict being
                                                          overturned in
                                                          1997
------------------------------------------------------------------------
19)        Ulaan       5 years; July     July 1996       Released at end
            Shovo       1996                              of term
------------------------------------------------------------------------
20)        Wei         13 years; June    ..............  Due for release
            Shouzhong   2002                              June 2002
------------------------------------------------------------------------
21)        Xi Yang     12 years; Sept.   Jan. 1997       Released on
                        2005                              parole
------------------------------------------------------------------------
22)        Xu Baiquan  8 years; June     June 1997       Released at end
                        1997                              of term
------------------------------------------------------------------------
23)        Yang        10 years; May     ..............  Due for release
            Tongyan     2000                              May 2000
------------------------------------------------------------------------
24)        Yu Zhenbin  12 years; June    June 1997       Released early;
                        2001                              SR-4 years
------------------------------------------------------------------------
25)        Zhang       13 years; June    ..............  Due for release
            Jingsheng   2002                              June 2000; SR
                                                          2 years
------------------------------------------------------------------------
26)        Zhang       15 years; June    Feb. 1998       Released on
            Xiaoxu      2004                              parole; SR -4
                                                          years
------------------------------------------------------------------------
27)        Zhang       12 years; May     ..............  Due for release
            Yunsu       2004                              Nov. 2002; SR
                                                          18 months
------------------------------------------------------------------------
28)        Zhao Lei    6 years; April    Oct. 1997       Released early;
                        1999                              SR -18 months
------------------------------------------------------------------------
29)        Zheng       15 years; June    ..............  Due for release
            Quanli      2004                              June 2001; SR
                                                          3 years
------------------------------------------------------------------------
30)        Zhou        15 years; Aug.    ..............  Due for release
            Guokui      2001                              Aug. 2001
------------------------------------------------------------------------
31)        Zhu         7 years; July     July 1996       Released at end
            Xiangzhon   1996                              of term
            g
------------------------------------------------------------------------
*The ILO has been advised that the original sentence was death with a
  two year reprieve.
** The Chinese Ambassador has informed two members of Congress that she
  has been released. This report is awaiting confirmation.


                             Attachment Four
 Table 2: Prisoners in Guangdong Province Asked About from 1995 to 1999
------------------------------------------------------------------------
                                                        Summary: Current
                           Original                        Status and
   No.        Name       Sentence and       Date of         Sentence
                       Date of Sentence     Release      Reductions (SR)
                          Completion                        on Record
------------------------------------------------------------------------
1)         Chen Meng   12 years; March   .............  Due for release
                        2007                             March 2007
------------------------------------------------------------------------
2)         Chen        10 years; July    Nov. 1995      Released on
            Zhixiang    1999                             parole; SR -2
                                                         years
------------------------------------------------------------------------
3)         Guo         3 years; Dec.     Dec. 1997      Released at end
            Baosheng*   1997                             of term
------------------------------------------------------------------------
4)         Li Jueming  18 years; Oct.    .............  Due for release
                        2007                             June 2005; SR -
                                                         2 years
------------------------------------------------------------------------
5)         Li          3.5 years; Nov.   Nov. 1997      Released at end
            Wenming*    1997                             of term
------------------------------------------------------------------------
6)         Liu         17 years; June    .............  Due for release
            Baiqiang    2006                             June 2002; SR -
                                                         4 years
------------------------------------------------------------------------
7)         Mu Wenbin*  5 years; Oct.     .............  Due for release
                        2000                             June 2000; SR -
                                                         4 months
------------------------------------------------------------------------
8)         Qin         Death, changed    Aug. 1999      Released early;
            Hanbiao     to life                          SR -6 years, 8
                        imprisonment.                    months
                        then reduced to
                        20 years; May
                        2003
------------------------------------------------------------------------
9)         Tang Tao    6 years; Feb.     .............  Due for release
                        2001                             Feb. 2001
------------------------------------------------------------------------
10)        Wu Jidong   10 years; June    Aug. 1995      Released early;
                        1999                             SR -3 years, 8
                                                         months
------------------------------------------------------------------------
11)        Zhang Yi    13 years; June    May 1998       Released early;
                        2002                             SR -3 years, 5
                                                         months
------------------------------------------------------------------------
12)        Zheng       14 years,         Feb. 1997      Released at end
            Qiuwu       changed to 13                    of term
                        years; Feb.
                        1997
------------------------------------------------------------------------
* Guo Baosheng, Li Wenming and Mu Wenbin were convicted of attempting to
  overthrow the government, an offense carrying a minimum sentence of
  ten years imprisonment. The court invoked Article 59 Paragraph Two of
  the 1979 Criminal Code to impose lighter sentences, and gave credit
  for time already served in detention.

      

                                


    Chairman Archer. Thank you, Mr. Kamm.
    Mr. Reuther, welcome. You may proceed.

STATEMENT OF ALAN REUTHER, LEGISLATIVE DIRECTOR, INTERNATIONAL 
UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT 
                    WORKERS OF AMERICA (UAW)

    Mr. Reuther. Thank you, Mr. Chairman, Mr. Rangel. My name 
is Alan Reuther. I am the Legislative Director for the UAW.
    In my oral remarks today, I would like to focus on the 
proposals which have been advanced by Representative Levin, 
some of which have now been picked up by the Administration and 
I believe also by the Chairman, to mitigate some of the 
fundamental problems in the WTO accession agreement.
    The UAW flatly rejects this misguided effort. Attached to 
my testimony is a letter signed by 12 unions, including the 
UAW, which rejects the Levin proposals and emphasizes that they 
cannot provide any justification for granting PNTR to China. We 
agree with Democratic leader Dick Gephardt who concluded that 
there are no measures available or under consideration that can 
effectively counteract the deficiencies of the WTO accession 
agreement.
    Representative Levin has proposed the creation of a joint 
congressional-executive commission on China to conduct an 
annual review of China's worker and human rights practices. 
This would simply create a toothless commission that could only 
monitor and report on abuses in China. In our judgment, this 
would be a poor substitute for the current annual congressional 
review of China's NTR trade status, which contains the only 
real leverage the United States possesses-that is, the threat 
of restrictions on access to the U.S. market.
    Representative Levin has also proposed that the U.S. should 
pursue the establishment of a working group on labor within the 
WTO. However, the U.S. is already required by statute to do 
this. Unfortunately, the prospects for establishing this 
working group will be undermined if China joins the WTO, since 
Chinese officials are adamantly opposed to it. Representative 
Levin's proposal does not require China to change its position 
as a condition for joining the WTO. Thus, this proposal is 
simply a diversion from the real problem, which is China's 
position on this issue.
    Representative Levin has further proposed that a special 
task force should be created to investigate violations of the 
U.S. law prohibiting the importation of products made by forced 
or prison labor. However, the U.S. and China have already 
signed an agreement designed to ensure that China does not 
export prison-made goods to the United States. Of course, China 
has violated this agreement. But there's nothing in the WTO 
rules to stop the U.S. from enforcing its law now by 
restricting these imports from China. What is needed now is 
concrete action by the U.S. government, not another toothless 
task force.
    Representative Levin has suggested that the procedures for 
invoking the product specific safeguard provision in the WTO 
accession agreement should be incorporated into legislation. 
But the problem here is that this provision is entirely 
discretionary. The Chinese government can voluntarily take 
actions to limit exports, or the U.S. government can exercise 
its discretion to limit imports from China. But the decision in 
both cases is up to the governments, not the injured domestic 
workers and firms. Putting this provision into legislation 
cannot remedy the fundamental problem that there is no 
assurance that any action will be taken to stop a surge of 
imports that could jeopardize the jobs of thousands of American 
workers.
    Representative Levin has further proposed that the U.S. 
government should issue annual reports on enforcement of 
China's WTO commitments. But the U.S. government already 
produces an annual review of compliance by other nations with 
their international tarde obligations, the National Trade 
Estimates Report on Foreign Trade Barriers. Unfortunately, the 
U.S. government has failed to take concrete actions to respond 
to the wide range of Chinese violations cited in these reports. 
Representative Levin's proposal unfortunately does not provide 
any new tools or leverage to encourage greater Chinese 
compliance.
    Lastly, Representative Levin has also proposed that the WTO 
should conduct an annual review of China's compliance with its 
obligations through its trade policy review mechanism. But with 
no mandatory process for changing China's policies, this would 
simply represent another toothless report.
    In conclusion, the UAW submits that the lengthy list of 
proposals by Representative Levin is inconsequential. Many of 
these proposals simply reflect policies that are already being 
pursued or implemented by the U.S. Government. Other proposals 
simply involve toothless monitoring or reporting requirements. 
None of the proposals contain meaningful enforcement mechanisms 
to ensure that concrete steps are taken to stop import surges 
that threaten the jobs of American workers to address Chinese 
abuses of worker and human rights, or to ensure compliance by 
China with its international obligations. Thus, there is 
nothing in this set of proposals that would fix the basic 
problems in the WTO accession agreement and justify the 
elimination of the current annual Congressional review of 
China's NTR trade status. Thank you.
    [The prepared statement follows:]

Statement of Alan Reuther, Legislative Director, International Union, 
United Automobile, Aerospace and Agricultural Implement Workers of 
America (UAW)

    Mr. Chairman, my name is Alan Reuther. I am the Legislative 
Director for the International Union, United Automobile, 
Aerospace and Agricultural Implement Workers of America (UAW). 
Accompanying me today is Steve Beckman, the Assistant Director 
of the UAW's Governmental and International Affairs Department. 
The UAW represents 1.3 million active and retired workers in 
the automotive, aerospace, and agricultural implement 
industries, as well as public sector and other employees. We 
appreciate the opportunity to testify on the U.S.--China 
bilateral agreement providing for the accession of China to the 
World Trade Organization (WTO) and the granting of permanent 
normal trade relations (PNTR) to China.
    The UAW believes the U.S.--China bilateral WTO accession 
agreement is fatally flawed. In particular, we believe this 
agreement is deficient because it:
     fails to effectively eliminate China's 
discriminatory automotive and aerospace industrial policies 
that are jeopardizing the jobs of American workers, or to 
guarantee that American workers will be protected against 
surges of imports from China in these and other sectors;
     fails to require China to recognize fundamental 
worker and human rights; and
     fails to provide adequate mechanisms to enforce 
China's various trade commitments.
    Because we believe the WTO accession agreement is 
fundamentally flawed, the UAW strongly opposes the granting of 
permanent normal trade relations (PNTR) to China. In our 
judgment, it would be a profound mistake for Congress to grant 
a ``blank check'' to China by ending the annual Congressional 
review of their trade status. This would eliminate our 
country's leverage to encourage China to eliminate its 
discriminatory trade policies, to recognize worker and human 
rights, and to abide by the commercial and agricultural 
commitments which it has made.
    The UAW testified before this Committee's Trade 
Subcommittee on China's possible accession to the World Trade 
Organization (WTO) in 1996, indicating the issues that we 
believed needed to be addressed in the WTO accession 
negotiations--China's discriminatory auto and aerospace 
industrial policies, the necessity of import surge protections 
for American workers, worker rights protections for Chinese 
workers, and continuation of annual NTR reviews by Congress. 
Since then we have testified many other times, informed 
Administration officials of our views and, as you know, sent 
many letters to Congress on this issue. The UAW has been 
consistent in its attention to this issue and in its standard 
for evaluating the U.S.--China trading relationship.
    In our testimony today, we will set forth the reasons why 
the U.S.--China bilateral WTO accession agreement that was 
negotiated in November, 1999 is deficient. We will then explain 
why the parallel legislation proposed by Representative Levin 
fails to fix the fundamental problems with the WTO accession 
agreement. Lastly, this testimony explains why it is now in the 
best interests of the United States for Congress to reject 
PNTR, and instead to continue the annual Congressional reviews 
of China's trade and other policies.

                        Threat to American Jobs

    The UAW believes the WTO accession agreement fails to take 
sufficient steps to protect American workers employed in 
various manufacturing industries. In particular, we are 
distressed that the accession agreement does not effectively 
eliminate China's discriminatory automotive and aerospace 
policies that are threatening the jobs of UAW members and other 
American workers. Equally troublesome is the fact that the 
accession agreement fails to contain adequate protections 
against huge surges of imports from China that could threaten 
the jobs of thousands of American workers.
    The provisions of the WTO accession agreement that cover 
automotive products have the same appearance as many other 
``market opening'' agreements that the U.S. government has 
reached with other countries with closed markets. In each 
instance, when such an agreement has been negotiated, the U.S. 
automotive trade deficit has worsened rather than improved. 
This has been the case for numerous agreements reached with 
Japan, for the North American Free Trade Agreement's coverage 
of Mexico and for the recent agreements with Korea. 
Unfortunately, the UAW believes the provisions in the WTO 
accession agreement will produce the same result. Despite 
reductions in tariffs and liberalization of quotas, China's 
market will remain effectively closed, limiting the increase in 
U.S. exports of vehicles and parts to that market. At the same 
time, the assurance of open access to the U.S. market will 
encourage an even faster pace of investment in China by U.S. 
assemblers and parts producers. As a result, U.S. imports from 
China, especially of auto parts, will soar. We have already 
seen the U.S. automotive trade balance with China shift from a 
surplus of $0.5 billion in 1993 to a deficit of $1.0 billion 
last year.
    China has accomplished this turnaround in automotive trade 
with the U.S. by forcing companies that want to sell in China 
to produce there and to use locally made parts and materials. 
General Motors, Ford and DaimlerChrysler all have assembly 
plants in China, as do many other multinational vehicle 
assemblers. Because of local content requirements and the 
attraction of low wages and the absence of worker rights 
protections, U.S.--based auto parts producers and their foreign 
competitors have also established production facilities in 
China. Parts producers, under considerable pressure from 
assemblers to lower their costs, are particularly prone to 
shifting production to China, where wages are a tiny fraction 
of U.S. levels. These companies are already in China and they 
have an interest in making their Chinese plants as profitable 
as possible by expanding production. We believe that will lead 
to significant exports to the U.S., displacing production here 
and the jobs of thousands of American autoworkers.
    Our experience with the 1992 U.S.--China Memorandum of 
Understanding (MOU) simply reinforces our concerns about the 
impact of the WTO accession agreement. In the 1992 MOU China 
agreed not to adopt import substitution industrial policies. 
But in 1994 China created an auto industrial policy and made it 
a ``pillar industry'' for China's economic development. The 
Administration has recognized that this policy, with its 
import-restricting, export-promoting measures, is a violation 
of the 1992 MOU. But to date no action has been taken to remedy 
China's blatant violation of this agreement, and to require 
China to dismantle its discriminatory auto industrial policy. 
Because China has this history of violating the 1992 MOU and 
numerous other trade agreements, there is every reason to 
believe that China will violate the WTO accession agreement as 
well. Since the multinational companies with production 
facilities in China have already achieved high levels of local 
content in their products, we believe it is unlikely they will 
complain about future violations. Instead, they are more likely 
to relish the benefits of less competition for their Chinese-
made products. The net result is that we will be faced with a 
continuing commitment to auto industry expansion in China that 
will cause a major surge of auto parts into the U.S., 
undermining the jobs of thousands of American workers.
    The situation in the aerospace industry presents similar 
dangers for American workers. China has given preferential 
treatment in aircraft orders to companies that transfer 
production to China. These ``offset'' deals have shifted 
significant production to China in recent years, at the expense 
of American workers' jobs. Even worse, the companies have 
succumbed to Chinese pressure to transfer advanced aerospace 
technologies to China in return for market access. In this way, 
sensitive technologies, with defense as well as civilian uses, 
have been transferred and new competitors for U.S. companies 
have been created.
    The WTO accession agreement contains a provision committing 
the Chinese government not to require technology transfers, 
offsets or local content requirements as a condition for 
investment or sales. We believe there are loopholes in this 
provision that will allow the Chinese government to continue to 
insist on these kinds of deals for companies that want to do 
business in China. In addition, the provision applies only to 
government actions, not to private agreements. Many Chinese 
state-owned enterprises have been privatized, so arrangements 
involving these firms and U.S. companies would not be affected 
by the technology transfer provision in the WTO accession 
agreement. However, in China's government-controlled economy, 
these firms are still effectively under the influence and 
control of government officials. Thus, there are a number of 
mechanisms available to various levels of government in China 
to influence the behavior of nominally private firms, rendering 
the WTO accession agreement's technology transfer provision 
irrelevant.
    Proponents of the WTO accession agreement and PNTR have 
tried to allay concerns about possible surges of imports from 
China by pointing to the product-specific safeguard provision 
in the accession agreement. This provision has been described 
as an improvement over Section 201 of U.S. trade law, which 
normally covers such import surges. However, this conveniently 
overlooks the fact that the ability of the product-specific 
safeguard provision to protect American workers against import 
surges is entirely up to the discretion of the U.S. and Chinese 
governments. This provision allows China to agree to voluntary 
export restraints and the U.S. to adopt import restrictions 
that apply only to China. The key word is ``allows.'' The UAW 
submits that, realistically, there is little chance this 
product-specific safeguard provision would ever be invoked. 
Given China's history of violating trade agreements and its 
aggressive pursuit of auto and aerospace industrial policies 
that limit imports and promote exports, we believe it is 
unlikely the Chinese government would ever agree to voluntary 
limits on their exports. At the same time, in light of the U.S. 
government's history of failing to take action against 
discriminatory trade policies by China and other countries, or 
to initiate safeguard measures in response to import surges, we 
also believe it is unlikely our government would invoke the 
product-specific safeguard provision.
    During the negotiations leading up to the WTO accession 
agreement, the UAW urged the Administration to seek protections 
against import surges that would automatically be triggered 
whenever their was a significant increase in imports from China 
in various manufacturing industries. Unfortunately, the 
product-specific safeguard provision that was ultimately 
included in the WTO accession agreement does not provide such 
automatic protection. As a result, we believe this provision 
does not provide meaningful protection for American workers 
whose jobs would be threatened by import surges from China.

                   Silence on Worker and Human Rights

    The UAW is distressed by the total silence of the WTO 
accession agreement on issues relating to worker and human 
rights. We are particularly troubled by the fact that U.S. 
negotiators did not even raise these issues with China.
    The UAW has made clear for years that we would oppose any 
accession agreement that fails to ensure China's prior 
compliance with internationally recognized worker rights 
protections, the ability of workers to enforce compliance 
through domestic laws and regulations and China's support for 
including worker rights in the WTO through the creation of a 
WTO working group on this subject. Unfortunately, the WTO 
accession agreement that was negotiated last November contains 
none of these essential points.
    The existence of massive abuses of workers' rights in China 
has been well documented. The U.S. State Department's annual 
Country Reports on Human Rights and Practices has made clear 
that the worker rights situation in China has been 
deteriorating. Child labor, prison labor, repression of 
independent unions, the lengthy imprisonment of independent 
union activists are all too common occurrences in China. In our 
judgment, trade and investment that takes place under these 
conditions cannot be considered ``fair.'' The fact that many 
American companies have invested in China to take advantage of 
these conditions, and that the massive U.S. trade deficit with 
China is fed by these injustices, makes the exclusion of worker 
rights issues from the WTO accession agreement all the more 
abhorrent.
    The UAW welcomes the Administration's support for 
incorporating worker rights into the WTO rules by creating a 
working group on these issues. But the sad truth is that 
China's accession to the WTO will almost certainly prevent the 
WTO from taking this small step so long as China continues to 
oppose the incorporation of worker rights into the WTO rules. 
That is why it is so shocking that U.S. negotiators failed to 
raise these issues, and therefore failed to get a commitment 
from China in the accession agreement to support the 
establishment of a WTO working group on worker rights. This 
effectively dooms any prospect for making progress on worker 
rights issues through the WTO.
    The WTO rules contain protections for the rights of owners 
of capital, ensuring that broad rights for multinational 
corporations are enforced by governments. But as long as the 
WTO rules fail to contain protections for the rights of workers 
that are at least as strong, workers throughout the world will 
be justified in seeing the WTO as a body that just advances the 
interests of corporations and economic elites, not the well 
being of working men and women.
    Under these conditions, the UAW believes Congress should 
reject PNTR for China and insist on a continuation of our 
annual reviews of China's human and worker rights practices. 
This is the only way for the United States to maintain some 
leverage to encourage China to curb its abuses of worker and 
human rights, and ultimately to support the inclusion of these 
issues in the WTO rules.

Enforcement of China's Trade Commitments

    China has a long history of violating its trade 
commitments. In particular, China has violated previous 
bilateral agreements on prison labor, intellectual property 
rights, textiles, and market access, thereby undermining the 
potential benefits of those agreements for the United States. 
In addition to this bad track record, the statements of many 
Chinese government officials in recent months also contribute 
to our skepticism regarding China's compliance with the new 
commercial and agricultural commitments which it has made in 
the WTO accession agreement. Specifically, Chinese officials 
have indicated that the agreements on tariff reductions, quota 
increases and liberalized foreign ownership are no more than 
words on paper. They describe what is possible, but will not 
necessarily determine what will happen. If the past is any 
guide, there will be far less effective market opening in China 
than proponents of PNTR expect.
    When violations of China's WTO commitments do, indeed, take 
place, we believe that the bilateral dispute settlement process 
now in place is preferable to the WTO process that would apply 
if the U.S. were to establish a WTO relationship with China by 
approving PNTR. The WTO dispute resolution procedures, which 
have been in place since 1995, have been slow to produce final 
decisions and cumbersome in their operations. Because of the 
limited scope of the WTO's rules, which are biased in favor of 
more trade and less government regulations for worker, consumer 
and environmental protections, several of its decisions have 
challenged legitimate U.S. laws and regulations. It has also 
become clear that the ways in which China and other countries 
with structural and non-market barriers discriminate against 
foreign products and services cannot be successfully challenged 
in the WTO. As a result, the WTO puts open, rules-based 
countries like the U.S. at a disadvantage.
    Being bound by the WTO process would also prevent the 
effective use of U.S. trade laws like Section 301 to address 
unfair Chinese practices that are not directly covered by WTO 
rules. Even though U.S. cases on such issues, including worker 
rights and toleration of restrictive business practices, could 
be filed and pursued, the WTO rules would not allow the U.S. to 
raise tariffs or limit access to the U.S. market. Thus, under 
the WTO rules these Section 301 cases could no longer provide 
any meaningful remedy against the unfair Chinese practices.
    In contrast, if Congress rejects PNTR the United States 
would be able to maintain the bilateral enforcement tools that 
are now in place, including Section 301. The UAW submits that 
there are numerous advantages to this approach. This would 
allow the United States to make effective use of all of our 
existing trade laws to respond to discriminatory practices by 
China. This would also allow the U.S. to respond to violations 
of bilateral trade agreements in place with China that are not 
part of our WTO commitments. Significantly, we would not have 
to worry about obtaining WTO approval for any U.S. actions.
    The main benefit of maintaining the current dispute 
settlement process, though, would be the continuing leverage of 
the annual Congressional review of China's NTR trade status. 
This annual review raises the threat that the U.S. could 
significantly limit access to its market if China continues to 
blatantly violate its trade commitments, or in response to a 
major deterioration in human or worker rights or other actions 
by China. The only way for the U.S. to keep its leverage on 
these issues intact and continue to pressure the Chinese 
government to make meaningful improvements in these areas is 
for Congress to reject PNTR for China at this time, and to 
insist on a continuation of the annual NTR reviews.
    Proponents of PNTR have claimed that U.S. business and 
farmers will lose the benefits of China's market opening 
commitments to other countries unless Congress eliminates the 
annual NTR reviews. We believe they are simply wrong. The 
bilateral trade agreement negotiated in 1979 and implemented in 
1980 sets the framework for the overall U.S.--China trading 
relationship. It provides broad Most Favored Nation (MFN, the 
trade status now referred to as NTR in the U.S.) treatment for 
U.S. products and firms in China, assuring access comparable to 
that afforded to other countries.
    The 1979 agreement covers tariffs, distribution in China, 
and the treatment of firms operating in China. It is much more 
expansive than the proponents of PNTR have acknowledged. We 
believe this agreement addresses substantially all of the areas 
included in China's WTO commitments and will prevent China from 
withholding the benefits of any market opening from U.S 
businesses and farmers.
    In addition, the high level of Chinese exports to the U.S. 
(which exceed U.S. exports to China by a seven to one ratio) 
makes it unlikely that the Chinese government would 
discriminate against U.S. businesses and farmers by denying 
them trade benefits accorded to other nations. In our judgment, 
China will not risk jeopardizing its nearly $70 billion trade 
surplus with the U.S. by violating the 1979 agreement and 
discriminating against U.S. interests. Under the 1979 
agreement, access to the U.S. market for China must be 
equivalent to the access afforded other countries, so 
discriminatory treatment by China would violate the agreement 
and invite retaliation by the United States.

     The Proposals Advanced By Representative Levin Do Not Fix The 
            Fundamental Flaws in the WTO Accession Agreement

    Recognizing that there are serious problems in the WTO 
accession agreement, a number of Representatives have suggested 
that these issues should be addressed through parallel 
legislation. In particular, Representative Levin has presented 
a number of proposals along these lines.
    The UAW and the rest of the labor movement flatly reject 
this misguided effort to craft a unilateral U.S. ``side 
agreement'' to mitigate some of the fundamental problems in the 
WTO accession agreement. Attached to this testimony is a letter 
dated February 29th signed by twelve unions, including the UAW, 
which rejects the Levin proposals and emphasizes that these 
proposals cannot provide any justification for granting PNTR to 
China. We agree with Democratic Leader Dick Gephardt who 
stated, when announcing his opposition to PNTR, that there are 
no measures available or under consideration that can 
effectively counteract the deficiencies of the WTO accession 
agreement.
    In rejecting the proposals put forward by Representative 
Levin, the UAW is not ignoring international economic reality 
or falling into isolationism. We simply believe that expanded 
international trade and investment must improve living 
standards for working people, in the U.S. and abroad. If a 
proposed agreement, instead, reinforces pressures to depress 
workers' incomes and diminishes their rights, then that 
agreement should be rejected and a different path should be 
taken. The UAW opposes the WTO accession agreement and the 
granting of PNTR to China because it fails to meet this simple 
test. Unfortunately, proposals for ``side agreements'' like 
those advanced by Representative Levin do not address in any 
meaningful way the fundamental deficiencies in the WTO or the 
U.S.--China bilateral accession agreement.
    In his testimony before this Committee in February, 
Representative Levin proposed the creation of a joint 
congressional-executive commission on China, to conduct an 
annual review of China's violations of human rights, labor 
rights and WTO commitments. The commission would produce 
recommendations for actions that the U.S. government could 
take. But these actions would have to be WTO-consistent and not 
violate any other U.S. international obligations.
    The problem with this proposal is that it substitutes an 
annual review that can only ``recommend'' certain limited 
actions for the annual Congressional review we now have, which 
has the authority to revoke China's NTR trade status. Since the 
recommendations under Representative Levin's proposal could 
only encompass actions that the U.S. can take under existing 
authority, the proposed congressional-executive commission adds 
no new authority and provides no new leverage to change China's 
behavior in these critical areas of concern. Instead, by 
eliminating the current annual Congressional review of China's 
NTR trade status, this proposal would eliminate the only real 
leverage which the United States possesses--that is, the threat 
of restrictions on access to the U.S. market. In our judgment, 
it would be a profound mistake for Congress to give up this 
leverage for a toothless commission that can only monitor and 
report on worker and human rights in China. This can only lead 
to a further deterioration of conditions in China.
    In the area of human rights, the State Department's annual 
report already provides a wealth of documentation of Chinese 
abuses. Creating a new staff and budget for a new commission 
would be unlikely to produce any startlingly new evidence. The 
same is true for worker rights violations. The State Department 
report documents these abuses, and the International Labor 
Organization also has resources for this purpose. If the 
problem in these areas was a lack of attention and information, 
creating a commission might make some sense. Unfortunately, 
that has not been the problem. The real problem has always been 
the absence of resolve to take effective actions to pressure 
China to change its practices on worker and human rights. 
Establishing a new congressional-executive commission to 
monitor and report on Chinese abuses will not help at all with 
this problem. What we need are more concrete tools to pressure 
China on these issues, and a Congress or Administration that 
are prepared to use these tools. Eliminating the tool we now 
have--the annual Congressional review of China's NTR trade 
status--can only represent a step backwards, no matter how many 
grand commissions are created to monitor and report on the 
situation in China.
    Representative Levin has also proposed that the U.S. should 
be committed to pursuing the establishment of a working group 
on labor within the WTO. However, the U.S. is already required 
by statute to pursue this objective. It will make no 
contribution to the advancement of worker rights within the WTO 
or in China to restate this position.
    The sad fact is that government officials in China have 
already stated that, as a WTO member, China will oppose the 
creation of a working group on labor. Other WTO member 
countries that are opposed to the working group have made it 
clear that they welcome China's joining the WTO, so that the 
forces against the worker rights initiative will be 
strengthened. The missing element in this equation is not the 
position of the U.S. government, it is the position of China's 
government. If Representative Levin's proposal required that 
China must support the working group on labor, as a condition 
for their accession to the WTO, we would welcome this proposal. 
But looking only at the position of the U.S. government is 
simply a diversion from the real problem.
    Representative Levin has further proposed that a special 
task force should be created to investigate violations of the 
U.S. prohibition on imports of products made by forced or 
prison labor. This proposal is ironic for several reasons. The 
U.S. and China have already signed an agreement in which China 
said it would provide the information necessary for the U.S. to 
ensure that China was not exporting prison-made goods to the 
United States. China has violated this agreement, as it has 
violated virtually every agreement it has signed with the 
United States. Prohibitions on imports of prison-made goods are 
among the few import restrictions allowed by the WTO, and its 
predecessor, the General Agreement on Tariffs and Trade (GATT). 
There is no impediment to the U.S. forcefully enforcing its 
law, at the expense of imports from China. Allegations of 
Chinese exports made by forced and prison labor have been made, 
and verified, for years. We heartily support the enforcement of 
U.S. law in this area. But this should hardly require the 
creation of a special task force. What is really needed, once 
again, is resolve by the U.S. government to use the tools 
currently at our disposal to take concrete actions against 
these serious abuses.
    To enhance enforcement of China's commitments in the WTO 
accession agreement, Representative Levin has proposed putting 
procedures for invoking the product-specific safeguard 
provision into legislation. He has also proposed strengthening 
Section 201 of U.S. trade law, which is designed to address 
this problem, as well as provisions of Section 301, which 
covers unfair foreign trade practices. This proposal also 
includes adding resources for monitoring and enforcing China's 
WTO obligations, including an annual report on China's 
performance.
    In our judgment, none of these proposals is meaningful. The 
product-specific safeguard provision in the WTO accession 
agreement needs much more than putting its procedures into 
legislation to make it effective. As described earlier, this 
``provision'' is entirely discretionary. The Chinese government 
can voluntarily take actions to limit exports, or the U.S. 
government can exercise its discretion to limit imports from 
China. The decision in both cases is up to the government, not 
the injured domestic workers and firms. Putting this provision 
into legislation cannot remedy the fundamental problem that 
there is no assurance that any action will be taken to stop a 
surge of imports that could jeopardize the jobs of thousands of 
American workers. And it cannot make this provision more 
effective in preventing import surges in the first place (by 
eliminating China's determination to maintain its auto and 
aerospace industrial policies), or speed up the process for 
obtaining relief from injurious imports. Thus, this proposal is 
too little, too late and still too discretionary.
    It has been widely known for many years that Section 201 is 
in need of revision. Unfortunately, Representative Levin's 
insistence that any changes must be WTO-consistent puts a tight 
rein on what could be adopted. Reducing the difficulty of 
meeting the domestic injury test is one change that the UAW has 
long supported and continues to support. We welcome 
Representative Levin's support for such a change, but it will 
not be enough to make utilization of Section 201 much more 
appealing to American workers losing their jobs to increased 
imports. When American steelworkers were experiencing such job 
losses, the Administration refused to exercise its authority to 
self-initiate a Section 201 case. If the Administration refused 
to act then, there is little likelihood that it would initiate 
a case under the revised standard. And businesses and workers 
that are adversely impacted by imports would still be unlikely 
to receive effective relief, even under the revised standard.
    The proposal to strengthen Section 301 of U.S. trade law is 
rather curious. It is now generally agreed that the teeth in 
Section 301 were removed by the Uruguay Round commitment to 
retaliate against unfair foreign trade practices only when 
authorized to do so by the WTO. Effectively, all Section 301 
cases are referred to the WTO for dispute resolution and the 
U.S. is stuck with the decision by the WTO dispute resolution 
panel. Section 301 is just the funnel for transmitting certain 
U.S. cases to the WTO. Accordingly, strengthening Section 301 
by expanding its definition of what kinds of foreign practices 
are ``unfair'' would provide little solace under the WTO 
system. Even if the U.S. were to determine that certain foreign 
trade practices were ``unfair'' under this expanded definition, 
we could not retaliate against these practices in ways that 
conflict with NTR treatment of the country and general WTO 
obligations. This limits the benefit of any Section 301 case to 
remedies that are not subject to WTO discipline. But those 
remedies are shrinking as WTO jurisdiction expands. As a 
result, it will be hard to identify any gains from 
``improvements'' to Section 301.
    Representative Levin has also proposed that the U.S. 
government should issue annual reports on the enforcement of 
China's WTO commitments. This simply covers the same ground as 
the congressional-executive commission described above. More 
importantly, it is important to note that the U.S. government 
already produces an annual review of how other nations have 
complied with their international trade obligations, the 
National Trade Estimates Report on Foreign Trade Barriers. In 
recent years the section of this book covering China has been 
quite large, describing the wide range of violations by China 
of its obligations to the United States. Finding the violations 
has not been the problem. The problem has always been the 
failure of the U.S. government to take concrete actions to 
eliminate the violations Representative Levin is suggesting no 
new leverage or tools to achieve that goal. Instead, by 
granting PNTR we would eliminate the leverage we now have 
through the annual NTR review.
    Representative Levin has also proposed that the WTO should 
conduct another annual review of China's compliance with its 
obligations, through its Trade Policy Review Mechanism (TPRM). 
As Representative Levin notes, China's size, the nature of its 
economy and the limited rule of law warrant frequent reviews. 
However, even if the WTO were to agree to this unprecedented 
schedule (the most frequent reviews are now every two years for 
a small number of countries, including the U.S.), the results 
of the TPRM process are not binding on anyone. We would, again, 
have a source of information on China's failure to fulfill its 
WTO obligations. But with no mandatory process for changing 
China's policies, this would simply represent another toothless 
report.
    Representative Levin has also suggested the need for 
certain institutional reforms of the WTO itself, including 
increased transparency through public release of documents, 
opening up the meetings of the dispute settlement panels, and 
accepting amicus briefs in the dispute settlement process. The 
UAW shares Representative Levin's commitment to these 
objectives. Indeed, the U.S. government has already endorsed 
these changes in the WTO and is pressing for their acceptance. 
These changes are desirable in their own right. But even if 
adopted, they are unlikely to have any effect on China's 
behavior in the WTO.
    In the end, the lengthy list of proposals made by 
Representative Levin is inconsequential. Many of these 
proposals simply reflect policies that are already being 
pursued or implemented by the U.S. government. Thus, these 
proposals are simply duplicative window dressing, and do not 
represent any improvement over the current state of affairs. In 
addition, many of the proposals simply involve toothless 
monitoring or reporting requirements. None of the proposals 
contain meaningful enforcement mechanisms to ensure that 
concrete steps are taken to stop import surges that threaten 
the jobs of American workers, to address Chinese abuses of 
worker and human rights, or to ensure compliance by China with 
its international obligations. Thus, there is nothing in this 
set of proposals that would fix the basic problems in the WTO 
accession agreement and justify the elimination of the current 
annual Congressional review of China's NTR trade status.

  The United States Has Nothing to Gain, and Much to Lose By Granting 
                       PNTR to China At This Time

    In light of the serious deficiencies in the U.S.--China WTO 
accession agreement, and the failure of the parallel 
legislation proposed by Representative Levin to address these 
deficiencies in any meaningful way, the UAW submits that it is 
in our national interest to reject PNTR at this time, and to 
retain the current annual Congressional review of China's trade 
status. Simply stated, our nation has nothing to gain, and much 
to lose by granting PNTR to China at this time.

If Congress rejects PNTR for China:

     China is still obligated under the 1979 agreement 
with the U.S. to give our businesses and farmers all of the 
tariff reductions and other trade benefits that it accords to 
other nations.
     The U.S. can still use its bilateral enforcement 
tools, like section 301 and super 301, to take action against 
discriminatory Chinese practices. These enforcement tools are 
superior to the cumbersome dispute resolution procedures under 
the WTO.
     Most importantly, Congress and the United States 
will retain the leverage of the annual NTR reviews to pressure 
China to honor the commercial and agricultural commitments 
which it has made, to make progress on worker and human rights, 
and to prevent import surges that would jeopardize the jobs of 
thousands of Americans.

In contrast, if Congress grants PNTR to China:

     We will lose the ability to use our bilateral 
enforcement mechanisms. Instead, we will be at the mercy of the 
WTO dispute resolution procedures, which take far too long and 
which don't apply to the many ways a non-market economy like 
China can discriminate against products and services made in 
the U.S.
     We will lose any ability to use the leverage of 
access to the U.S. market to pressure China to honor its 
commercial and agricultural commitments, to encourage China to 
make progress on worker and human rights, or to stop import 
surges that threaten American jobs.
     Once we have granted PNTR to China, Congress 
cannot repeal this trade status without subjecting the U.S. to 
sanctions under the WTO. Thus, Congress and the U.S. will be 
left without any effective recourse if China continues its past 
practices of failing to honor its trade commitments and 
repressing basic worker and human rights.
    For all of these reasons, the UAW believes it makes no 
sense to give China a blank check by granting it PNTR at this 
time.
    Mr. Chairman, Members of Congress face a very important 
choice on the China PNTR issue. We firmly believe that the WTO 
accession agreement negotiated with China is deficient in many 
important ways. Under its terms, the absence of balance in the 
international trading system will be reinforced rather than 
corrected. As a large, rapidly growing economy, China will have 
significant influence in the WTO and the direction that it 
takes. Unless worker rights and environmental protections are 
incorporated into the rules of this trading system, trade and 
international economic integration will continue to contribute 
to growing economic inequality, within and among nations, 
downward pressure on workers' incomes and reduced social and 
environmental standards.
    The majority of Americans believe the trading system must 
do more to promote social justice and equitable economic 
development. UAW members, their families and their communities 
are insisting on this. Granting permanent normal trade 
relations to China and accepting the fatally flawed WTO 
accession agreement would be a giant step in the wrong 
direction. It would eliminate the single most significant 
leverage we have to move China toward fair treatment and 
democratic rights for its citizens--namely, the current annual 
Congressional review of China's NTR trade status.
    We urge you as strongly as possible to oppose PNTR, thereby 
leaving the door open to a more balanced, beneficial U.S. 
trading relationship with China and to an international trading 
system that can address the concerns of workers for a fair, 
safe and healthy world.
            Thank you.

                                                  February 29, 2000
Dear Representative:
    During a recent hearing by the Ways and Means Committee on the 
China WTO trade deal, Representative Sander Levin presented a five 
point proposal dealing with human rights, import surges, and 
enforcement of China's commitments. The unions listed below believe 
this Levin proposal fails to provide any effective improvement on these 
key issues. Accordingly, we do not believe the Levin proposal provides 
any justification for granting permanent NTR trade status to China.
    In our judgment, the Levin proposal is nothing more than fig leaf. 
It has absolutely no teeth, and thus would not lead to any concrete 
progress relating to human rights, import surges, or enforcement of 
China's commitments

Worker and Human Rights

    The Levin proposal calls for the establishment of a special U.S. 
congressional-executive commission that would monitor and report on 
China's record relating to worker and human rights. But this commission 
would have absolutely no power or leverage to influence China's actions 
in these areas. Unlike the current annual review of NTR trade status, 
the monitoring and annual reports of this commission would not be 
linked to any trade status or sanctions. Thus, this amounts to nothing 
more than a meaningless reporting requirement that China could ignore 
without fear of any adverse consequences.
    The Levin proposal also calls for the U.S. to pursue the 
establishment of a working group on labor within the WTO. But this is 
nothing more than a restatement of the existing policy of the Clinton 
Administration. While the UAW and the rest of the labor movement have 
supported the establishing of a WTO working group on labor, the sad 
reality is that China's accession to the WTO completely undermines any 
realistic possibility of obtaining this objective in the foreseeable 
future.

Import Surges

    The Levin proposal calls for the enactment of legislation spelling 
out the procedures for invoking the anti-import surge provision in the 
U.S.--China bilateral accession agreement--the so-called ``product 
specific safeguard'' provision. Unfortunately, this anti-import surge 
provision is completely voluntary on China's part, and completely 
discretionary on the part of the United States. There is absolutely no 
guarantee that it would ever be invoked, by either China or the U.S., 
to halt any surge of imports in textiles, auto parts, steel, aerospace, 
electronic or other products. Even if the legislation proposed by 
Representative Levin allowed Congress to invoke the anti-import surge 
provision, past history suggests that there is little likelihood that 
this would ever happen.
    The Levin proposal also calls for the strengthening of the general 
anti-import surge provision in section 201 of U.S. trade law. Although 
the UAW would welcome this change, it still would not guarantee 
American workers protection against import surges from China. The 
unfortunate truth is that section 201 has seldom been invoked to 
protect American workers from import surges in the past.

Enforcement of China's Commitments

    The Levin proposal calls for the WTO's Trade Policy Review 
Mechanism (TPRM) to conduct an annual review of China's compliance with 
its WTO commitments. Again, this would simply lead to the issuance of 
another meaningless report, with absolutely no teeth to address any 
violations by China of its commercial or agricultural commitments. This 
proposal does not contain any new enforcement tools or sanctions. The 
existing WTO enforcement mechanisms are notoriously slow and 
cumbersome, and do not apply to the myriad ways that non-market 
economies like China can discriminate against imports of products and 
services from the U.S. and other countries.
    For all of the foregoing reasons, the unions listed below believe 
that the proposal set forth by Representative Levin would not lead to 
any significant improvement in the areas of worker and human rights, 
import surges, or enforcement of China's commitments. Accordingly, we 
strongly oppose any attempt to use this proposal as a justification for 
granting permanent NTR trade status to China. In our judgment, the only 
way to retain meaningful oversight and leverage by Congress on these 
key issues is to reject permanent NTR trade status for China.
            Sincerely,
    American Federation of Government Employees (AFGE)
    American Federation of Teachers (AFT)
    American Federation of State, County and Municipal 
Employees (AFSCME)
    Int'l. Brotherhood of Boilermakers, Iron Shipbuilders, 
Blacksmiths, Forgers and Helpers (IBB)
    International Brotherhood of Teamsters (IBT)
    Paper, Allied-Industrial, Chemical & Energy Workers 
International Union (PACE)
    Service Employees International Union (SEIU)
    Transport Workers Union of America (TWU)
    Union of Needletrades, Industrial and Textile Employees 
(UNITE)
    United Automobile, Aerospace & Agricultural Implement 
Workers Of America (UAW)
    United Mine Workers (UMW)
    United Steelworkers of America (USWA)
      

                                


    Chairman Archer. Thank you, Mr. Reuther.
    Mr. Burns, welcome, and you may proceed.

  STATEMENT OF KYLE J. BURNS, DIRECTOR, INTERNATIONAL SALES, 
             COLUMBIA 300, INC., SAN ANTONIO, TEXAS

    Mr. Burns. Thank you. Good afternoon, Chairman Archer and 
members of the Committee. It is my privilege to testify this 
afternoon regarding the benefits of China's accession to the 
World Trade Organization and the necessity of granting 
permanent normal trade relations status to China.
    My name is Kyle Burns, and I'm the Director of 
International Sales at Columbia 300, Inc. Columbia manufactures 
high-performance, mid-performance and entry level bowling balls 
in San Antonio, Texas. We are an active member of the Texas 
International Trade Alliance, which is affiliated with the 
Business Roundtable's grass-roots trade education program 
called goTRADE. The Texas International Trade Alliance is a 
coalition of local small, medium and large companies, academics 
and other officials that promote the benefits of international 
trade to Texas communities. Columbia and the Texas 
International Trade Alliance strongly support China's accession 
to the World Trade Organization and PNTR.
    I would like to talk to you today about how China's 
accession to the WTO will benefit Texas, and more specifically 
how China's accession will benefit a small Texas company like 
Columbia.
    The Chinese market is very important to Texas. Direct 
exports from Texas to China totaled almost $1 billion in 1998. 
If you add indirect exports through Hong Kong, Texas exports to 
China totaled $1.2 billion. These exports were broadly 
diversified with almost every major product category 
registering exports to China in 1998. And these exports are 
increasing rapidly. Many key Texas export categories more than 
doubled their sales to China from 1993 to 1998.
    Small and medium size companies in Texas are responsible 
for a growing share of exports to China. In 1997, small and 
medium size companies accounted for an astounding 71 percent of 
the 672 companies that exported merchandise from Texas to 
China. China's accession to the WTO offers Texas companies, 
employees and farmers the best opportunity to increase their 
exports to China even further. China's WTO commitments address 
the principal market access barriers to Texas products and will 
increase market access beginning on the first day of China's 
membership in the WTO.
    The new opportunities created by this new market access 
will lead to economic growth in Texas and an improved standard 
of living for Texas families. It is therefore certainly in 
Texas' best interest to bring China into the global trading 
system.
    China's accession to the WTO will also benefit my company 
tremendously. Columbia was founded in 1960 and now employs 
approximately 200 people. Our modern complex of offices, 
factory and warehouse space in San Antonio houses the most 
technologically advanced plant in the bowling industry. And we 
dedicate millions of dollars to research and development so 
that we can bring innovative ideas and technology to the sport 
of bowling.
    Although many people view bowling as a uniquely American 
sport, Columbia has been exporting bowling balls around the 
world for more than 35 years. We ship bowling balls and 
accessories from San Antonio to more than 50 countries, in 
Latin America, Europe, the Middle East, South Africa and Asia. 
These markets are extremely important for our business. 
International customers account for 20 percent of our total 
sales, and the Asian market is the most important, accounting 
for 80 percent of our international sales.
    The Chinese market is particularly important for Columbia. 
We began exporting bowling balls indirectly to China through 
Hong Kong approximately seven years ago. We began exporting 
directly to China approximately four years ago. Our main 
markets are in the major metropolitan areas along the east 
coast of China. Recently, China has accounted for as much as 7 
percent of our international sales and promises the greatest 
growth potential for our products. China's accession to the WTO 
will help Columbia realize its growth potential.
    Under the U.S.--China WTO agreement, China has agreed to 
eliminate its tariffs on all bowling equipment. The tariff 
reductions will commence upon accession and be fully 
implemented by January 1st, 2005. The U.S.--China WTO agreement 
also alleviates a whole host of current restrictions on doing 
business in China. For example, China currently imposes severe 
restrictions on trading rights, the right to import and export, 
and distribution rights, the right to provide wholesaling, 
retailing, maintenance and transportation services.
    Foreign companies have no right to distribute products 
other than those they make in China. They cannot own or manage 
distribution networks, wholesaling outlets or warehouses. Under 
the WTO agreement, China will for the first time grant U.S. 
companies like Columbia the right to import without Chinese 
middlemen. It will also permit full rights to distribution. We 
will therefore have the freedom to establish our own networks 
to distribute our products in China. And the application of WTO 
dispute settlement proceedings and other enforcement mechanisms 
will ensure that China meets its commitments.
    In addition, China's accession to the WTO will spur 
economic growth and boost demand for our products in China. 
Since China began introducing market reforms in 1978, it has 
been growing at the highest rate of any major economy. This 
economic growth has helped to lift millions of Chinese citizens 
out of poverty, doubling or even tripling real incomes. 
Bringing China into the WTO will accelerate China's economic 
growth and raise disposal incomes even further, thereby 
increasing wherewithal for ordinary Chinese citizens to 
purchase our products.
    As a direct result of China's accession to the WTO, we 
expect a 20 percent increase in our sales to China in the short 
term. In the long term, our sales to China easily could surpass 
our current worldwide sales. The increased sales will greatly 
benefit our employees. Their jobs depend on opening new market 
in China and other countries as the demand for bowling products 
in the United States diminishes.
    The increased sales will also indirectly benefit employees 
in many other Texas companies. Employees at our urethane 
supplier in Dallas and our boxing supplier in San Antonio, 
among others, depend upon our success for their jobs. Our 
increased sales to China, after its accession to the WTO, 
therefore will provide benefits to a whole chain of Texas 
companies and their employees.
    In order for Columbia and other Texans to realize the 
benefits discussed above, Congress must grant PNTR to China. 
Without PNTR, China could join the WTO and extend those 
benefits to Columbia's foreign competitors in Japan and South 
Korea but justifiably withhold them from the United States. 
Please do not let that happen. We cannot afford to lose the 
Chinese market to our foreign competitors.
    On behalf of Columbia 300, therefore, I urge you to support 
PNTR for China. Thank you.
    [The prepared statement follows:]

Statement of Kyle J. Burns, Director, International Sales, Columbia 
300, Inc., San Antonio, Texas

    Good morning Chairman Archer and members of the Committee. 
It is my privilege to testify this morning regarding the 
benefits of China's accession to the World Trade Organization 
(WTO) and the necessity of granting permanent Normal Trade 
Relations (PNTR) status to China.
    My name is Kyle Burns, and I am the Director of 
International Sales at Columbia 300, Inc. Columbia manufactures 
high-performance, mid-performance, and entry-level bowling 
balls in San Antonio, Texas. We are an active member of the 
Texas International Trade Alliance, which is affiliated with 
The Business Roundtable's grass-roots trade education program 
called goTRADE. The Texas International Trade Alliance is a 
coalition of local small, medium, and large companies, 
academics, and other officials that promote the benefits of 
international trade to Texas communities. Columbia and the 
Texas International Trade Alliance strongly support China's 
accession to the WTO and PNTR.
    I would like to talk to you today about how China's 
accession to the WTO will benefit Texas, and more specifically 
about how China's accession will benefit a small Texas company 
like Columbia.

I. China's Accession to the WTO Will Benefit Texas 
Tremendously.

    The Chinese market is very important to Texas. Direct 
exports from Texas to China totaled almost $1 billion in 1998. 
If you add indirect exports through Hong Kong, Texas exports to 
China totaled $1.2 billion. These exports were broadly 
diversified, with almost every major product category 
registering exports to China in 1998. And these exports are 
increasing rapidly--many key Texas export categories more than 
doubled their sales to China from 1993 to 1998.
    Small and medium-sized companies in Texas are responsible 
for a growing share of exports to China. In 1997, small and 
medium-sized companies accounted for an astounding 71 percent 
of the 672 companies that exported merchandise from Texas to 
China.
    China's accession to the WTO offers Texas companies, 
employees, and farmers the best opportunity to increase their 
exports to China even further. China's WTO commitments address 
the principal market access barriers to Texas products and will 
increase market access beginning on the first day of China's 
membership in the WTO. The new opportunities created by this 
new market access will lead to economic growth in Texas and an 
improved standard of living for Texas families. It is therefore 
certainly in Texas's interest to bring China into the global 
trading system.

II. China's Accession to the WTO Will Also Benefit My Company 
Tremendously.

    Columbia was founded in 1960 and now employs approximately 
200 people. Our modern complex of offices, factory, and 
warehouse space in San Antonio houses the most technologically 
advanced plant in the bowling industry, and we dedicate 
millions of dollars to research and development so that we can 
bring innovative ideas and technology to the sport of bowling.
    Although many people view bowling as a uniquely American 
sport, Columbia has been exporting bowling balls around the 
world for more than thirty-five years. We ship bowling balls 
and accessories from San Antonio to more than fifty countries 
in Latin America, Europe, the Middle East, South Africa, and 
Asia. These markets are extremely important for our business--
international customers account for twenty percent of our total 
sales. And the Asian market is the most important, accounting 
for eighty percent of our international sales.
    The Chinese market is particularly important for Columbia. 
We began exporting bowling balls indirectly to China through 
Hong Kong approximately seven years ago, and we began exporting 
directly to China approximately four years ago. Our main 
markets are in the major metropolitan areas along the east 
coast of China. Recently, China has accounted for as much as 
seven percent of our international sales, and it promises the 
greatest growth potential for our products.
    China's accession to the WTO will help Columbia realize 
this growth potential. Under the U.S. China--WTO Agreement, 
China has agreed to eliminate its tariffs on all bowling 
equipment. The tariff reductions will commence upon accession 
and will be fully implemented by January 1, 2005.
    The U.S.--China WTO Agreement also alleviates a whole host 
of current restrictions on doing business in China. For 
example, China currently imposes severe restrictions on trading 
rights (the right to import and export) and distribution rights 
(the right to provide wholesaling, retailing, maintenance, and 
transportation services). Foreign companies have no right to 
distribute products other than those they make in China, and 
they cannot own or manage distribution networks, wholesaling 
outlets, or warehouses. Under the WTO Agreement, China will for 
the first time grant U.S. companies like Columbia the right to 
import without Chinese middle-men, and it will also permit full 
rights of distribution. We will therefore have the freedom to 
establish our own networks to distribute our products in China. 
And the application of WTO dispute settlement proceedings and 
other enforcement mechanisms will ensure that China meets its 
commitments.
    In addition, China's accession to the WTO will spur 
economic growth and boost demand for our products in China. 
Since China began introducing market reforms in 1978, it has 
been growing at the highest rate of any major economy. This 
economic growth has helped to lift millions of Chinese citizens 
out of poverty, doubling or even tripling real incomes. 
Bringing China into the WTO will accelerate China's economic 
growth and raise disposable incomes even further, thereby 
increasing the wherewithal for ordinary Chinese citizens to 
purchase our products.
    As a direct result of China's accession to the WTO, we 
expect a twenty percent increase in our sales to China in the 
short-term. In the long-term, our sales to China easily could 
surpass our current worldwide sales. The increased sales will 
greatly benefit our employees. Their jobs depend upon opening 
new markets in China and other countries as the demand for 
bowling products in the United States diminishes. The increased 
sales will also indirectly benefit employees at many other 
Texas companies. Employees at our urethane supplier in Dallas 
and at our boxing supplier in San Antonio, among others, depend 
upon our success for their jobs. Our increased sales to China 
after its accession to the WTO therefore will provide benefits 
to a whole chain of Texas companies and their employees.

Conclusion

    In order for Columbia and other Texans to realize the 
benefits discussed above, Congress must grant PNTR to China. 
Without PNTR, China could join the WTO and extend those 
benefits to Columbia's foreign competitors in Japan and South 
Korea but justifiably withhold them from the United States. 
Please do not let that happen. We cannot afford to lose the 
Chinese market to our foreign competitors. On behalf of 
Columbia 300, I therefore urge you to support PNTR for China.
    Thank you.
      

                                


    Chairman Archer. Thank you, Mr. Burns.
    Mr. Laux, welcome, it's good to see you again. We'll be 
pleased to receive your testimony.

  STATEMENT OF DAVID N. LAUX, PRESIDENT, U.S.-TAIWAN BUSINESS 
                   FORUM, ARLINGTON, VIRGINIA

    Mr. Laux. Thank you, Mr. Chairman, Congressman Rangel, 
distinguished members of the Committee. Thank you for including 
me in this panel of distinguished speakers today.
    I am David Laux, the President of the U.S.-Taiwan Business 
Forum, and until one month ago, for almost 10 years, I was 
president of the U.S.-ROC-Taiwan Business Council, made up of 
some 200 U.S. companies and organizations doing business with 
Taiwan.
    Prior to that, I was for almost four years the Chairman of 
the American Institute in Taiwan, the Instrumentality, which is 
effect our substitute for an embassy in dealing with the 
economic, cultural and other relations with the people of 
Taiwan. And I had a stint for almost five years on the 
International Security Council staff as director of Asian 
affairs, and really, my 49 years of working life, I've spent 
most of it working on improving U.S. relations with the Chinese 
people, both on the mainland and in Taiwan.
    I want to speak for just a moment on the importance of 
Taiwan to the United States. Because the essential thrust I 
want to make here is that granting PNTR to China is good for 
Taiwan and our relationship with Taiwan. And it's going to help 
increase business with both Taiwan and the United States. And I 
don't think this is well known, but it is going to, in my view, 
result in a small explosion of the cross-Strait trade going on 
between Taiwan and China. And that in itself is going to help 
to ameliorate some of the tensions in the straits.
    Taiwan, has the world's third largest foreign exchange 
reserves after Japan and the People's Republic of China, 
totaling $113 billion at the end of March. And something close 
to 70 percent of that is invested in U.S. dollar instruments. 
Taiwan is the world's second largest creditor nation after 
Japan, because they have virtually no foreign debt as opposed 
to China, which has a substantial foreign debt.
    Their trade with us was $54.3 billion last year, making it 
our seventh largest partner behind Canada, Japan, Mexico, 
China, Germany and Great Britain. And ahead of countries like 
South Korea, France, Singapore and Italy. Taiwan bought one and 
a half times as much from us last year as China did. In earlier 
years, it was even greater. And the $20 billion or so per year 
that they have bought the last three years, let me put that in 
perspective. That is half as much as all of South and Central 
America, not counting Mexico, buys from the United States. It's 
twice as much as all of Africa, and it's five to seven times as 
much as either India or Russia buys from us. Not bad for 22 
million people living in a country a little over the size of 
Maryland.
    Taiwan applied for membership in the GATT, WTO's 
predecessor organization, in 1990, became an observer in 1992. 
They have now completed, a little more than a year ago, all of 
the arrangements with us and their multilateral negotiations. 
And they are in effect in a holding pattern waiting to get into 
WTO. And while the U.S. Government's position is that Taiwan's 
accession is not linked to that of the People's Republic of 
China, the current reality is that the WTO working party, 
because of the positions of some of its members who are close 
to the People's Republic, is not going to reach a consensus 
agreement approving Taiwan's entry until China is ready, too.
    The Administration's objective-shared, I think, by 
virtually all members of WTO, is that both China and Taiwan 
accede to the WTO this year. The point I want to make is that 
we have with Taiwan, just as we do in the agreement with the 
People's Republic, agreements that are substantial concessions 
to the United States. But they don't go into effect until 
Taiwan gets into the WTO.
    So I think it's imperative that the U.S. take a strong 
position in trying to get Taiwan in, at the same time, not with 
a five minute coffee break or taking it up a day later. And I'm 
a little bit disturbed by the wording--what is otherwise 
brilliant testimony by Charlene Barshefsky, the U.S. Trade 
Representative--where on page 15 she says, ``China's entry will 
facilitate Taiwan's entry into the WTO.'' To me, that smacks of 
maybe it isn't going to happen at the same time, and there 
might be a substantial interval afterwards. I think the U.S. 
position should be strongly that they get in at the same time.
    I'm going to skip, in the interests of time, the benefits 
as I see them of PNTR for China, and mention Taiwan's trade 
across the Strait. Taiwan's annual trade with China is now over 
$25 billion. And Taiwan has invested something like $45 billion 
into about 40,000 enterprises in the United States, in the 
mainland. Permanent NTR for China benefits those Taiwan-owned 
companies in the mainland, and denying PNTR would therefore 
hurt Taiwan.
    When Taiwan and China are both in the WTO, there's going to 
be an expansion of trade across the Straits. And many U.S. 
companies have an interest in this. For instance, some of the 
automobile manufacturers in the United States want to 
manufacture parts in China that will be sent to Taiwan and put 
together there.
    Now, I'm running out of time, so I want to just sum up 
here. PNTR and WTO entry for these two important partners works 
toward the opening up and reform of the system in China. And 
it's likely to change China in a positive way more than just 
bringing the benefits of greater trade to the Chinese people.
    In short, it's going to help move them towards democracy. 
This is what happened in Taiwan; it's what's going to happen in 
China.
    Now, I'm getting a little long in the tooth, and at 72, I 
wonder what I'm going to do with the rest of my life. I have 
eight children and fifteen grandchildren, and I spend a lot of 
time thinking about what's right. I think what is right for the 
United States in this instance is not to use the continuing 
annual review of Normal Trade Relation status as a tool to bash 
China with every year in attempting to get concessions in other 
areas, such as human rights, religious rights and so forth. I 
think there are other instrumentalities we could use for that, 
and we should not use NTR at the cost that it would be for the 
U.S. companies that would not receive the substantial benefits 
negotiated by the Administration if we deny PNTR and continue 
to have annual review.
    So to sum up, in my view, PNTR is good not only for U.S. 
companies dealing with China, it's good for assisting U.S. 
companies dealing with Taiwan. It's good for Taiwan. We should 
move to see that both countries get into the WTO together.
    And my last sentence I guess would be, looking at the list 
of people that Charlene Barshefsky ended her testimony with, 
that are in favor of this--every living former Secretary of 
State, 47 Governors of States and territories, all present and 
former U.S. trade representatives, Secretaries of Commerce, 
Agriculture, Treasury and four former Presidents, what else is 
there to say.
    Thank you.
    [The prepared statement follows:]

STATEMENT OF DAVID N. LAUX, PRESIDENT, US-TAIWAN BUSINESS FORUM, 
ARLINGTON, VA

Mr. Chairman, and distinguished Members of the Committee:

    Thank you for inviting me here today to present views on 
Permanent Normal Trade Relations (PNTR)for the People's 
Republic of China and accession to the World Trade Organization 
(WTO) for China and Taiwan.
    Background/credentials. First, a word about my background 
and credentials. Most of my working life over the past 49 years 
has been spent in some way trying to improve U.S. relations 
with the Chinese people--on both sides of the Taiwan Strait. 
For 4 and \1/2\ years (1982-1986) in the Reagan Administration 
I was Director of Asian Affairs on the National Security 
Council staff dealing primarily with China and Taiwan; for 3 
and \1/2\ years (1987-1990) I was Chairman and Managing 
Director of the American Institute in Taiwan--the organization 
which is, in effect, our substitute for an Embassy in 
conducting the U.S. unofficial, ``commercial, cultural and 
other relations'' with Taiwan. On April 1 of this year I 
stepped down as President of the US-ROC (Taiwan) Business 
Council after 9 and \1/2\ years to devote my full time to the 
position of President of the US--Taiwan Business Forum, a 501-
c-3 foundation, dedicated to economic research, business 
educational exchanges, and educational seminars focused on 
developing new business opportunities and strengthening U.S. 
economic and business relations with Taiwan, and through 
American participation in cross-Strait trade, with China.
    Purpose. I believe the purpose of my testimony is to show 
that the granting of PNTR to China and the accession of China 
to WTO will be beneficial for the people of Taiwan and will 
help promote U.S. trade and business with both China and 
Taiwan.
    Economic Importance of Taiwan. I want to begin with a brief 
description of the economic importance of Taiwan because, while 
many are aware of their reputation as an ``economic miracle'' 
and one of the economic ``Tigers'' of Asia, not many know the 
spectacular statistics behind this achievement. The Republic of 
China on Taiwan has the world's third largest foreign exchange 
reserves after Japan and the People's Republic of China. They 
totaled $113 billion at the end of March, and something close 
to 70% of this is invested in U.S. dollar instruments. 
Moreover, Taiwan is the world's second largest ``creditor 
nation'' after Japan because they have virtually no foreign 
debt.
    Taiwan's two-way trade with the U.S. was $54.3 billion in 
1999, making Taiwan the U.S.'s seventh largest trading partner 
behind Canada, Japan, Mexico, China, Germany and Great Britain, 
and ahead of countries like South Korea, France, Singapore and 
Italy. Taiwan is the U.S.'s eighth largest foreign market and 
second largest in Asia after Japan. Taiwan bought one and a 
half times as much from the U.S. in 1999 as did China. In 
earlier years the difference was even greater. In 1997, 1998 
and 1999, Taiwan purchased $20.4, $18.2 and $19.1 billion 
respectively of U.S. goods. Let me put this in perspective; it 
is enormously important. It is half as much as all of South and 
Central America (not counting Mexico) buys from the U.S., twice 
as much as all of Africa, and five to six times as much as 
either India or Russia buys from the U.S.--not bad for 22 
million people in an area one and a half times the size of 
Maryland.
    Taiwan is the world's 18th largest economy, the world's 
14th largest trader, and 12th largest exporter. Taiwan is the 
world's 7th largest foreign investor and is the largest or 
second largest foreign investor in Vietnam, Thailand, Malaysia, 
the Philippines and China. Taiwan's economy survived the Asian 
financial crisis better than almost any other, and recovered 
quickly from the devastating earthquake of September 1999 to 
achieve a growth rate of 5.4% in 1999. The economy is 
accelerating, and the latest forecast is for 6.5% growth this 
year. In short, Taiwan is one of the major economic, financial, 
and trading powers in the world today, and it should be in the 
WTO.

WTO for Taiwan; WTO for China; and PNTR for China.

    1. WTO for Taiwan. In 1990 Taiwan applied for membership in 
the GATT, WTO's predecessor organization, and became an 
observer in 1992. Since then, it has negotiated with the GATT 
and the members of the successor WTO ``working party'' 
established to consider Taiwan's application. Taiwan will enter 
as a ``developed'' economy, which means meeting more rigorous 
and demanding requirements than those for a ``developing `` 
economy. As of this date, Taiwan has completed all bilateral 
agreements with its major trading partners, and all substantive 
work on the multilateral negotiations, which is the completion 
of the working party report and protocol. Taiwan needs to have 
a final meeting with the working party to get their agreement 
to forward the report to the full WTO Council. While the U.S. 
government's position is that Taiwan's accession is not linked 
to that of the People's Republic of China, the current reality 
is that the WTO working party, because of the positions of some 
of its members, is not going to reach a ``consensus'' agreement 
approving Taiwan's entry until China is ready too. The 
Administration's objective, shared I think by virtually all 
members of the WTO, is that both China and Taiwan accede to the 
WTO this year.
    The US-ROC (Taiwan) Business Council has been on record 
favoring Taiwan's entry into the WTO since the bilateral 
agreement was signed between the U.S. and Taiwan (through the 
American Institute in Taiwan and the Taipei Economic and 
Cultural Representative's Office) on February 20, 1998. The 
agreements provide important reductions in tariffs and 
increased U.S. access for U.S. companies to Taiwan's 
automobile, medical equipment, financial services, 
telecommunications, beef, pork and other markets--but these 
terms do not go into effect until Taiwan is a member of WTO. In 
short, from a practical point of view, the sooner China is in 
WTO, the sooner U.S. companies obtain these new advantages, not 
only the ones negotiated with China, but those negotiated with 
Taiwan.
    The sooner this happens, the sooner the U.S. can make a 
significant impact on reducing the $16 billion trade deficit 
with Taiwan and the $ 68 billion trade deficit with China.
    Common sense would dictate that Taiwan should enter the WTO 
now, because it has met the requirements, but if that is not 
possible, then everything should be done to ensure that Taiwan 
and China are admitted at the same time--without a ``coffee 
break,'' or any other pause between the entry of China and the 
entry of Taiwan.
    The WTO is not a political organization. It is a framework 
of rights and obligations among economies which have, through 
negotiations, undertaken mutual economic commitments. For 
decades, the various economies in GATT, WTO's predecessor 
organization, were legally known as contracting parties, rather 
than as member governments. Taiwan's application is as ``The 
Separate Customs Territory of Taiwan, Penghu, Kinmen, and 
Matsu,'' not as ``Taiwan'' or the ``Republic of China.''
    If ever there was an ideal candidate for membership in the 
WTO, it has to be Taiwan. Few economies are more committed to, 
and dependent upon, trade for their economic well being. Yet, 
after a decade of attempting to qualify for membership in the 
GATT and its successor, the WTO, Taiwan,--despite the fact that 
it is one of the most active participants in world trade--still 
sits on the sidelines. WTO membership is important to Taiwan 
and Taiwan could make significant contributions to the WTO. For 
Taiwan, its WTO membership will be its most significant 
participation in an international organization.
    2. WTO and PNTR for China. The US-ROC (Taiwan) Business 
Council has been on record since 1996 in favor of Most Favored 
Nation trading status for China and for the past two years in 
favor of China's entry into the WTO. On January 26 of this year 
the Council put out a press release recommending Permanent 
Normal Trade Relations for China. The reasons are simple. Most 
of the US Council's member companies do business with China, as 
well as with Taiwan, and they believe that permanent NTR for 
China is good for both China and Taiwan, and is also good for 
U.S. business relations with both the People's Republic of 
China and the Republic of China on Taiwan.
    As I understand it, the substantial benefits in terms of 
lower tariffs and increased access to China's markets that were 
negotiated over 13 years between the U.S. and China in the 
agreement signed on November 15, 1999, would be seriously 
limited if the U.S. does not grant PNTR to China. The U.S. 
would still get the tariff reductions negotiated, but not the 
market access improvements which were the more significant part 
of the package. The excellent study done by Gary Clyde Hufbauer 
and Daniel H. Rosen of the Institute for International 
Economics in April, 2000, goes into this aspect in some detail.
    Taiwan's Trade with and Investment in China. Taiwan's 
annual trade with China is now over $25 billion and Taiwan 
companies and individuals have now invested a total of $40 to 
$45 billion in China in over 40,000 enterprises. Many of these 
companies manufacture goods for export to the United States. 
Permanent NTR for China benefits these Taiwan-owned companies, 
and denying PNTR to China would hurt Taiwan.
    Taiwan's View of Normal Trade Relations and WTO for China. 
Taiwan has been in favor of normal trade relations for China 
since at least early 1996. On May 7, 1996, the Wall Street 
Journal published a letter entitled ``MFN for China is also 
good for Taiwan'' written by Jeffrey Koo, Chairman and CEO of 
Chinatrust Commercial Bank, and then Chairman of the Chinese 
National Association of Industry and Commerce and also then 
Chairman of the ROC-USA Business Council, the Taiwan 
counterpart organization to the US-ROC (Taiwan) Business 
Council. That letter certainly had the tacit endorsement of the 
ROC government. Since then, officials of the ROC government in 
Taiwan have been increasingly open in their support of MFN and 
normal trade relations status for China and for China's entry 
into the WTO. Both President Lee Teng-hui and President-elect 
Chen Shui-bian are on record in favor of the People's Republic 
of China's entry into the WTO. Taiwan sees this as an important 
step in bringing the PRC into the community of nations and 
getting them to play by the rules of the game, rather than 
being kept outside. With respect to the current U.S. debate 
over ``Permanent'' Normal Trade Relations for China, Taiwan's 
officials have remained silent, viewing it as a domestic U.S. 
issue and a bilateral issue between the U.S. and China on which 
they should not comment. President-elect Chen Shui-bian has 
said he would like to see trade relations between the U.S. and 
the PRC ``normalized,'' but he did not use the word PNTR or 
permanent normal trade relations. Privately, however, many of 
the officials I have talked to have expressed the hope that the 
U.S. will grant PNTR to China because they see it as an 
important gesture in maintaining and increasing U.S. influence 
with the PRC.
Why the U.S. Should Grant PNTR to China.

    1. The U.S. will gain the full benefits of the substantial 
agreements it negotiated with China, in the agreement signed 
November 15, 1999.
    2. It would be a psychological boost that might speed the 
entry of both China and Taiwan into the WTO.
    3. The sooner both are in, the sooner the U.S. will benefit 
from the agreements that it has negotiated with parties.
    4. Once both China and Taiwan are in the WTO, there will be 
an expansion of trade across the Taiwan Strait. Taiwan now has 
a long list of items which it prohibits from being imported 
from China. Although this list has been shortened over the 
years, it is still substantial. It is my understanding that 
Taiwan could continue to exclude these items from import after 
both are in the WTO through a little used special exclusion 
provision which one WTO member can exercise against another, 
but my private soundings in Taiwan lead me to believe that this 
almost certainly will not be done because of the adverse 
psychological impact this would have on the already tense and 
delicate cross-Strait relations. On the contrary, I would 
expect Taiwan to abolish this list as a gesture of good will. 
If this happens, some important benefits will accrue to the 
U.S. Some U.S. manufacturers are interested in manufacturing 
parts or components in China and shipping them to Taiwan for 
assembly into larger components or finished products. In short, 
a jump in cross-Strait trade after the entry of China and 
Taiwan into WTO is going to provide new business opportunities 
to U.S. companies.
    5. The increase in economic and business interaction across 
the Taiwan Strait will contribute to a lowering of tensions. It 
will create larger constituencies on both sides with a vested 
interest in peaceful relations and a continuing expansion of 
economic, financial and other ties.
    6. Some confidence-building in the economic aspects of the 
cross-Strait relationship could help spill over to more 
confidence in any political talks.
    7. Finally, all of this works toward the opening up and 
reform of the Chinese system. Nothing is likely to change China 
in a positive way more than bringing the benefits of greater 
trade to the Chinese people It will bring them foreign goods 
more cheaply and it will provide jobs and more prosperity to 
China's workers. It will accelerate the development of a market 
economy and spur the needed reforms of China's antiquated state 
enterprises and its weak banking system. The opening of the 
country and growth in trade and prosperity will also lead to 
expansion of interest in, and more open communication with, the 
rest of the world. In short, it will help move the PRC toward 
democracy. This is what happened in Taiwan.

Notable Endorsements of PNTR for China by Others.

    There have been some strong cases made for the granting of 
PNTR to China by others, notably: the April Study by the 
Institute for International Economics, cited earlier; a GAO 
study along similar lines; an OP-ED article in the April 
20,2000 Los Angeles Times by Dai Qing, a Chinese 
environmentalist and human rights activist in Beijing; and the 
testimony of the Honorable Frank Carlucci, Chairman of the US-
ROC (Taiwan) Business Council (and also Chairman of The Carlyle 
Group, and Nortel Networks), to the Senate Foreign Relations 
Committee on April 6.

Conversely, Denying PNTR to China will do the following:

    1. It will not prevent China's entry into the WTO.
    2. It would seriously limit the large gains won at the 
negotiating table contained in the November 15 agreement. The 
U.S. would not get the market access aspects of that package 
and this would put U.S. firms at a serious disadvantage in 
competing with European and Japanese firms in China.
    3. It would not be helpful to Taiwan. It could hurt Taiwan 
and could delay China's and Taiwan's entry into the WTO. U.S. 
interests would suffer with both parties.
    4. It would do further damage to our already troubled 
relationship with China.

Conclusion.

    Over the past 50 years, continuous trade liberalization has 
enabled world trade to grow much faster than national 
production, pulling all economies into sustained, higher 
growth. The principal way in which trade liberalization has 
been achieved is through
    negotiations within the multilateral trading system--
especially the General Agreement on Tariffs and Trade (GATT), 
and its successor organization, the World Trade Organization 
(WTO). This expanded trade has helped boost prosperity around 
the world. However, nearly two billion still remain outside the 
WTO, including the 22 million people of Taiwan and the 1.2 
billion of the People's Republic of China. One way to remedy 
that is to get Taiwan and China into the WTO as soon as 
possible. PNTR for China will help that process.
    Let me conclude by quoting part of the final paragraph of 
Jeffrey Koo's letter to the Wall Street Journal of May 7, 1996, 
favoring MFN for China, which I mentioned earlier.
    ``No country has a larger interest than Taiwan in seeing 
prosperity take hold on the mainland. For prosperity will help 
push mainland China into becoming a responsible member of the 
international community, abiding by international laws, 
including protection of human rights.. . .That's a long-term 
outcome that would benefit everyone--Taiwan, the U.S., the 
Asian-Pacific region, and most of all the Chinese people on the 
mainland.''
    Thank you for inviting me to appear before you. I will be 
happy to try to answer any questions.
      

                                


    Chairman Archer. Thank you, Mr. Laux.
    Earlier today we heard an impassioned plea from our 
colleague, Frank Wolf, who is genuinely and sensitively 
interested in both human rights and religious rights in China. 
And he exhorted us to turn down permanent normal trading 
relations with China because of their violation of both human 
and religious rights.
    And yet today, Reverend Su, you are here, and Mr. Kamm is 
here, both directly and vitally involved in these two issues, 
religious and human rights. And you are encouraging us to pass 
permanent NTR for China. And you are genuinely interested, as 
our friend Frank Wolf is genuine interested, in advancing the 
cause of religious and human rights in China, and as is Elliott 
Abrams.
    I don't understand. And yet as I read your bio, Reverend 
Su, you were born in China, raised in China. You converted to 
Christianity while in China, within the in-house church, which 
has been repressed, which has been persecuted in the ways that 
our colleague Frank Wolf has mentioned occurred, in the way 
that Elliott Abrams has mentioned, as a reason not to approve 
permanent NTR.
    And yet you as a human embodiment of what has occurred over 
there, say we should. Why is that? I listened very carefully to 
your testimony, but I just, I don't correlate how people who 
are as genuinely interested in pursuing this as I am personally 
can disagree.
    Reverend Su. Well, I think there's an issue where, you 
know, good people can genuinely disagree over something that we 
all feel passionately about. Like I say in my testimony, I also 
feel the urge to want to send China message through every 
conceivable means. But I also want to be realistic enough and 
ask, aside from making me feel good, what good does it 
accomplish for people there that we try to help. So when I 
begin to ask the realistic questions, I find myself coming down 
a little bit.
    So in our efforts to try to send any message, we need to 
ask, what do we cause in the process. It might cost us much 
more than whatever we try to accomplish. So I really appreciate 
the passions and the support of many people who feel very 
strongly about the human rights issue and religious freedom 
issue in China. But I would just like to encourage us all to 
look at the whole picture and put ourselves in the shoes of 
those people in China who are going to be affected by this 
vote.
    With this vote, will it be better off for them, or will it 
make it even worse for them. So that will be the perspective I 
think we all should take a look at this issue. Thank you.
    Chairman Archer. Mr. Kamm, I have not heard of your work 
before today. I am very impressed with what you're doing and 
very touched by it. Do you believe that if we turn down 
permanent NTR for China that it will improve your capability to 
do your work and to help those who have been imprisoned to get 
lighter sentences? Will you be in a better position if we turn 
down permanent NTR, or will that in some way deteriorate your 
position?
    Mr. Kamm. Well, Mr. Chairman, I can't answer entirely that 
hypothetical question. But in my opinion, my work would be 
hindered. As I make the case in both my written statement and 
my oral testimony, I do think that we have certain channels of 
communication. And on one point, I would say that Congressman 
Frank Wolf, who I have a great deal of admiration for--
    Chairman Archer. As I do.
    Mr. Kamm.--we don't agree on the means of achieving greater 
respect for human rights in China. But we do, I think, agree on 
one thing. And that's the importance of speaking out at every 
opportunity. When Members of Congress go to China, I don't know 
if the four members who accompanied Secretary Glickman brought 
with them lists of religious people in prison, labor leaders in 
prison. I don't know if they did that or not. If they didn't, 
they missed an opportunity.
    I've been doing this for 10 years. I believe I've 
intervened on behalf of more than 500 prisoners. I've come up 
with an additional 500 names through this project, and I'll be 
going to Beijing in a few days to specifically talk about those 
prisoners.
    If the relationship between the United States were to 
worsen, certainly my work would be affected. In the past, it 
has been affected. My program has been suspended in the past 
because of breakdowns in the relationship.
    Chairman Archer. Mr. Abrams, you've heard the comments of 
the two gentlemen to your left there. And I'm curious, how is 
it going to help to accomplish the desired goals, which I think 
all of us agree are desirable goals, on a bipartisan basis? How 
will it help us if we do not approve permanent trade relations 
with China?
    Mr. Abrams. Mr. Chairman, our fear is that if Congress and 
the Executive Branch do nothing more than approve PNTR, the 
message that might get sent to the government in Beijing is, in 
reaction to this year of increased religious repression, we 
have nothing to say and we don't want anything, we don't want 
to do anything.
    So the Commission did not propose that PNTR be junked. What 
the Commission recommended was that before PNTR be approved, 
certain steps be taken. Certain steps be at least begun, so as 
to ensure in part that the right message is being sent.
    For example, Mr. Kamm in his written testimony mentions 
that there is money appropriated by Congress to have the State 
Department help identify prisoners. Never been spent. That's 
the kind of thing the Administration can do on its own. We've 
mentioned a few other steps for the U.S. Government to take 
that we think in conjunction with the vote would make it much 
clearer that Congress and the Executive Branch are not 
indifferent, that they are doing what has been proposed here, 
speak out, speak out simultaneously. Don't just do the vote and 
remain silent on human rights.
    Chairman Archer. Well, that may have an appeal in its own 
way. But as I understood your testimony, you said that we 
should not take this vote up until we have achieved certain 
things in China.
    Mr. Abrams. Our list--that's correct, but--
    Chairman Archer. And that's far different than what you 
just said.
    Mr. Abrams. No, I think it isn't, because I think if you 
look at the list, these are things that can begin to happen 
awfully fast. For example, the ones that we're proposing for 
the U.S. Government could actually happen almost instantly. I 
mean, the Levin proposal is that kind of thing. That is, for 
monitoring Chinese human rights. An invitation to the Dalai 
Lama, I guess the Speaker could issue this afternoon.
    For the Chinese, we asked for substantial improvement. Take 
the example of the international covenant on civil and 
political rights. We're aware that the Chinese government may 
not be able to vote it instantly. But they could make a 
commitment to do so, and they could do that tomorrow morning.
    So what we're asking for is at least commitments to move in 
the right direction on the part of the Chinese. And on the part 
of the United States, there are some things that we think could 
be done really before the vote is taken, even on the schedule 
you have now.
    Chairman Archer. Well, you, to use a word that's been used 
frequently by both the President and the Vice President and has 
been used by witnesses today, you are suggesting a very risky 
approach, which could prolong these deliberations for an 
interminable period of time. If the conditions that must be 
complied with by the Chinese, now it's a different thing when 
you say what our Government could do.
    But if you are talking about certain actions by the Chinese 
or results in China, we could be here for years. And in the 
meantime, China will be in the WTO. We cannot vote to stop 
that. China will enter the WTO. That is the realism of where we 
are today. They not only can, they will enter the WTO, likely 
before the end of this year. And nothing that we say or do here 
will change that.
    And then, what leverage do we have?
    Mr. Abrams. Mr. Chairman, several of the people who 
testified today, and I think you yourself noted that the 
original schedule was to vote after the Europeans had resolved 
their disputes with China, which would give an additional 
window in time.
    But the Commission's view was that to go ahead with the WTO 
vote, after this kind of deterioration in the situation in 
China, without taking any steps, without asking the Chinese for 
any steps, would in fact be undercutting many of the things 
we're trying to achieve. Because many of the people here 
testified that the purpose is to move China toward respect for 
law, toward international covenants on law and respect for 
rights. And the Commission felt that if you vote that way 
without asking for anything from China, the wrong message will 
very much be sent.
    Chairman Archer. Well, but we have asked for a great deal 
in the rule of law, and establishing a transparent rule of law. 
And the Chinese have committed to that in order to enter the 
WTO. That is already a part of the agreement.
    But the opponents of permanent NTR for China, including 
many labor unions, say, well, delay it, delay it. What they 
really want to do is stop it. And delay with the ultimate goal 
of stopping it will not prevent China from entering the WTO. 
And as you heard, Mr. Kamm and Mr. Su, will reduce our ability 
to intercede and to do the things that we are doing, perhaps 
not to the degree and not the success that you would like. But 
far, far better than the China I saw when I first went there in 
1985.
    And to look at only perfection and ignore the course that 
our engagement with China has already brought about, and what 
Reverend Su says will occur in the future in his opinion of 
continued improvement, is a very risky thing to do. In seeking 
some ultimate goal, which we all would like to have, if we 
regress, we retrogress in our capabilities, it will have been a 
pyrrhic victory.
    Mr. Abrams. Mr. Chairman, our view was, or is, that it 
isn't going to work in terms of human rights progress if we 
think of this as a machine that we turn on. That is to say, we 
vote WTO, China enters the WTO, we stand back for 25 years and 
wait for human rights to develop. It won't work that way.
    It will work if along with the WTO entry, we figure out 
better, more workable ways of bringing pressure for human 
rights improvements. And that's what we've tried to do in the 
Commission, to think up some things that the United States 
could do right now, and that the Chinese could at least agree 
to do, even if they couldn't carry it out in a short time, that 
would begin to move us and to move China down the road to real 
engagement on human rights.
    Chairman Archer. If we today attempt to go to the Chinese 
and reopen the negotiations on WTO, which is exactly what you 
are suggesting that we do, because you are saying that we now 
go to them and we say, well, the deal that we negotiated is not 
the full deal, there's another pre-condition that you have got 
to agree to now, then we have in effect undermined the entire 
negotiated deal. Because it is not just some parallel track. It 
is a pre-conditioned linkage that becomes a part of the 
negotiated deal. That is not realistic.
    What my colleague and friend Sander Levin, who was here a 
minute ago, is trying to do, is realistic and would move in the 
direction that you're talking about. And yes, we should find 
every means that we can to continue to help to move China in 
the right direction. But as I listened to Reverend Su, and I 
listened to Mr. Kamm, I must say, I think their approach is far 
more realistic and does not risk retrogression, which would be 
the worst possible thing that we could do.
    But that's just my opinion. I mean, this is a difference of 
opinion between people who want to reach the same desired goal.
    Mr. Abrams. Just one more comment, Mr. Chairman. With 
respect to the things that we've suggested the U.S. can do, 
like Mr. Levin's suggestion, those are things that could happen 
very, very fast. On the Chinese side, our hope would be that, 
you know, the Administration can go to the Chinese government 
and say, look, we're 20 votes short. You could really help us 
out if you could think of doing X or Y or Z, or promising to do 
X or Y or Z. And that might push us over the top and we'll all 
benefit.
    We are not, in the Commission, trying to kill this treaty. 
Others may be. We are not. We are trying to figure out ways 
that the United States can make clear our commitment to 
progress in human rights in China while the treaty is under 
consideration.
    Chairman Archer. Thank you very much.
    Mrs. Johnson.
    Mrs. Johnson. Thank you.
    Mr. Abrams, I am disappointed in your testimony. I think 
you're being very shortsighted. I think the effect of your 
testimony is to give ammunition to those who would kill the 
treaty.
    And I think you're failing to recognize what an enormous 
advancement this negotiated agreement is over anything we have 
ever had. It has highly specific commitments in all areas, 
clear time tables for implementation and firm end dates for 
full compliance. This means you can hold parties accountable to 
this agreement.
    If you can hold China accountable for passing intellectual 
property protection, intellectual property to get that law in a 
society that doesn't honor individual ownership of concrete 
property, this is going to have, I think as Reverend Su 
understands, very systemic, profound effects.
    And this is not a one shot agreement. This agreement puts 
in place processes and a far more intense United States 
oversight of U.S.--Chinese relations than frankly we have ever 
had before in economic or human rights areas.
    But I really need to devote the little time I have to Mr. 
Reuther's testimony. Because I'm sorry, Mr. Reuther, my 
colleagues will tell you I'm very frank and I'm not always very 
nice. And I can't actually think of any way to describe your 
testimony except dishonest.
    And this is why. You say it fails to implement China's 
discriminatory automotive and aerospace industrial policies. 
Now, I have a lot of aerospace and a lot of auto parts in my 
district. And if there's anything I care about and have a track 
record on, it's basic manufacturing.
    Yet for you to say that about an agreement that drafts, 
now, remember, China now imports about 600 American cars, 
that's fewer cars than an ordinary American dealership sells in 
a single year in America. This agreement will drop tariffs 75 
percent. From on average, 80 to 100 percent down to 25 percent.
    Tariffs on parts from 23 to 10 percent. True, it doesn't 
eliminate. But those are drops of enormous proportions.
    But listen to the other things it does. Over five years, it 
will eliminate quotas. It will allow auto companies to set up 
sales and service organizations. Now, what's going to happen to 
the UAW auto jobs in America when European auto manufacturers 
can not only sell into the Chinese market, but can set up 
maintenance, car repair, all the services that are so important 
when you make a decision about buying a car?
    Do you think under those circumstances Chinese are going to 
buy American cars or European cars? I can tell you what I'd buy 
if I were a Chinese consumer. I would buy a car that could be 
repaired in my home town by the manufacturer who made it.
    So what you're doing is endangering the jobs of UAW auto 
workers five years down the road, ten years down the road. In 
aerospace, it not only reduces tariffs from an average 14.7 
percent to 8 percent, but listen to what else it does. And it 
also eliminates quotas and licensing requirements. But local 
content, they agree to eliminate local content requirements and 
not to enforce provisions in existing contracts that impose 
those requirements. We are currently in the process of losing 
jobs in Connecticut because of such requirements.
    In technology transfer, they will not condition import or 
investment approvals on technology transfer or on conducting 
research and development in China. They will provide better 
intellectual property protection for technology. I mean, these 
things really do matter. And if our competitors are able to be 
in that market without these constraints, and we're not, it 
will not cost us jobs this year or next.
    But those competitors will be far more profitable in the 
end than we are. Because China will begin to buy in these areas 
and get great quantities over the next five or ten years. If 
you're more profitable than I am, you finally have the money 
for the research and development for the next round of 
products, for the more sophisticated cars and--
    Mr. Kleczka. Would the gentlelady from Connecticut yield?
    Mrs. Johnson. Not just--no, let me finish.
    Mr. Kleczka. Well, I do wish you would afford Mr. Reuther 
some time to respond after that tongue lashing.
    Mrs. Johnson. I appreciate that. That's the problem with 
the short times we get. But his testimony, not recognizing the 
remarkable benefits that this agreement is going to give, and 
then you go on to say it doesn't provide adequate mechanisms to 
enforce China's various trade commitments. And yet it's the 
very first agreement ever to provide product specific 
safeguards, to provide surge protection, to provide--
    Mr. Reuther. Congresswoman, would you permit me to respond?
    Mrs. Johnson. I am going to give you a chance to respond, 
Mr. Reuther. But I am absolutely, I want to be sure to get on 
the record the depth of my concerns. And I hope that the 
Chairman will indulge me in a couple of minutes for you to 
respond.
    Yes, you may respond.
    Mr. Reuther. Congresswoman, the arguments you have made are 
the exact same arguments that were made on behalf of NAFTA. 
When NAFTA was being debated, we were being told, oh, the U.S. 
market's open, but the Mexican market is closed. NAFTA is going 
to get rid of the Mexican tariffs, the Mexican restrictions. 
This will be great for the U.S. auto industry.
    Well, the sad truth is, since NAFTA went into effect, the 
automotive trade deficit between the United States and Mexico 
has increased from about $3.5 billion to almost $20 billion. 
It's been a disaster for the United States and for American 
workers.
    The same thing is going to happen with China, again. The 
International Trade Commission looked at the China trade deal 
and their opinion was, it's going to lead to an increase in our 
automotive trade deficit with China. It's not going to help 
things, it's going to make them worse.
    You referred to the technology transfer provisions and 
aerospace. The problem there is there's a huge loophole. It 
doesn't apply to the private firms. They're going to be 
continuing, the private firms in China will be continuing to 
say to our companies, if you want to do business here, you have 
to transfer technology. The accession agreement does nothing to 
get rid of that.
    On autos, it does nothing to get rid of China having 
designated the automotive sector as a pillar industry expressly 
designed to beef up their exports and cut off imports. The 
bottom line is the net effect of this deal is going to be a 
green light to all of the big auto companies, especially the 
parts producers, to shift production to China, to use it as a 
platform to export back here. We're going to see thousands of 
American jobs being lost as a result.
    Mrs. Johnson. Well, I think that first of all, I don't 
think you're correct. But I'll have to check on it, because it 
is not in the detail. And I think if it were only to the state 
owned sector and not to the private sector, that would 
certainly be noted.
    But given this kind of opportunity to export and service 
and distribute, we are far better positioned to sell our parts 
to producers over there than they're positioned to sell their 
parts to us, because their parts are not of a quality, unless 
we are involved.
    But for you to say, pin your testimony on the word 
eliminate, without acknowledging the tremendous reductions in 
tariffs, the eliminations of quotas, the distribution rights, 
the service rights, the ability to set up a whole American 
distribution industry--
    Mr. Reuther. All of that was done under NAFTA, and yet the 
bottom line is, we've had a disaster in terms of the automotive 
industry.
    Mrs. Johnson. But NAFTA was a different matter. NAFTA had, 
we gave some things and they gave some things. In this case, we 
have an open market, and all we're doing is getting their 
market open. Furthermore, they are a much bigger market with a 
much bigger demand. And you know as well as I know that right 
after NAFTA was passed, the Mexican market collapsed due to the 
collapse of its banks.
    I will yield to--let's see, I need to recognize Mr. 
Kleczka.
    Mr. Kleczka. Do we know how much time is left on the vote 
on the Floor? I don't want to miss that vote.
    Mrs. Johnson [Presiding]. Ten minutes.
    Mr. Kleczka. Is the Committee going to continue to meet 
during the vote or recess? Are there three votes after this? 
Maybe we should just recess and come back, Madam Chair. Would 
that be nice.
    Mrs. Johnson. Well, we need to conclude before we go. And 
Mr. McCrery would like to inquire.
    Mr. Kleczka. Mr. Doggett, are you going to inquire? Okay, 
that's 20 minutes, we've got 10 minutes left on the vote. 
Something doesn't add. But I'll take my five minutes.
    Mrs. Johnson. Two and a half minutes each.
    Mr. Kleczka. Mr. Chairman, in questioning, when Chairman 
Archer was here, he seemed to indicate that there are those who 
just want to scrap the current negotiated deal and reopen it. I 
think, Mr. Abrams, in questioning to you, that was one of the 
things he mentioned.
    However, the people that I talk to have not espoused 
scrapping the deal. But what they're saying to me, and maybe 
you can respond to this, and anyone else on the panel, what 
they're saying to me is, all right, this is something brand 
new. China's coming into WTO, they're going to be a full member 
with 135 other countries worldwide. Because of the problems 
we've had with that country, let's go a little slower than just 
throwing open the door and giving them permanent status.
    No one has come to me and said, Jerry, I want you to vote 
to scrap the entire deal. But what I'm hearing is, do like you 
do currently, Congress, give them annual review. Now, is that 
what you're asking us at this Committee hearing today? Or are 
you saying scrap the deal, start from scratch?
    Mr. Abrams. We are certainly not saying scrap the deal. 
We're saying, there are some human rights, religious freedom 
measures that our Government should take first before you vote 
this, and that we should ask the Chinese to do at least.
    Mr. Kleczka. And now, Mr. Reuther.
    Mr. Reuther. Go back and get an effective protection 
against import surges that isn't conditioned on voluntary 
action by the Chinese government or totally discretionary 
action by ours. Give some assurance to American workers that 
there won't be a surge of imports that's going to wipe out 
their jobs.
    Mr. Kleczka. And what's going to happen if we do call the 
annual review and there's no movement? What do we do the next 
time the review period comes forward?
    Mr. Reuther. We think that because China has such a stake 
in access to the U.S. market that if our Government takes a 
strong position we can bring about change in both the area of 
import surges and improvement in worker and human rights.
    Mr. Kleczka. Mr. Kamm, did you want to respond?
    Mr. Kamm. I would only point out, of course, that we have 
for 10 years, had the annual renewal debate since Tiannamen 
Square.
    Mr. Kleczka. Have we seen any improvement?
    Mr. Kamm. I would say during the period of time that they 
thought they might lose MFN, in the early 1990s, we did see 
some concessions. But post-1994, we have seen no concessions.
    Mr. Kleczka. So you're saying, give them permanent because 
they're not going to change anyway? Sort of like we say in my 
district, don't kid a kidder, give them permanent?
    Mr. Kamm. In a sense, I think they've got perpetual NTR 
now, and the debate is whether you give the permanent or 
perpetual. Perpetual is what they get every year, they expect 
it, they're not willing to make concessions to keep it. And I 
really do think what Secretary Rubin, basically my 
understanding of what he said is, if in fact we go forward and 
continue to renew annually, the principal impact of voting down 
PNTR will be to signal the government of China that this 
country has chosen a particular course for future relations.
    Mr. Kleczka. It might also give them the message that we 
want to keep the pressure on to make sure environmental 
concerns, religious concerns, labor concerns are on the top of 
the majority or on the top of their priorities in that country.
    Mrs. Johnson. Thank you, Mr. Kleczka. Mr. McCrery.
    Mr. Kleczka. In wrapping up, Madam Chair, if I--
    Mrs. Johnson. Mr. Kleczka, you really have to let Mr. 
McCrery go on so we can get Mr. Doggett, please.
    Mr. McCrery.
    Mr. McCrery. I'll be brief, I hope. Mr. Reuther, I've 
talked with your local UAW folks down in Shreveport about this. 
I think they are genuinely concerned, as you are, about the 
effects of this trade agreement, as you are about NAFTA. I will 
concede that on the issue of rights of workers in China, that 
as Reverend Su says, good people can disagree on the facts 
about the effect one way or another that this agreement would 
have on human rights over the long term. I don't think either 
of us will have convinced the other that we're right or we're 
wrong on that issue.
    But on the issue of jobs in the United States, and I hear 
what you're saying, but gosh, it just seems like the tremendous 
weight of testimony and evidence that we have heard is contrary 
to what you have asserted. And let's take the NAFTA question. 
In the last five or six years, what has happened to the 
population of automobile workers here in the United States? My 
understanding is that it's grown, not shrunk. Is that correct?
    Mr. Reuther. The number of people employed in the auto 
industry has been holding constant. And the reason for that is 
that we've had record sales of about 17 million. As everyone 
knows, sooner or later there's going to be a downturn in sales. 
Then the question becomes, where do they close the production 
facilities, here or in Mexico or China? We think the answer is 
pretty clear. Already the major auto companies are telling 
their suppliers, put your new facilities in Mexico. And now 
with this deal, they're going to be saying, put them in China.
    Mr. McCrery. But the fact is that we have not lost, since 
NAFTA has gone into effect, we have not lost any auto workers.
    Mr. Reuther. With 17 million in auto sales, we should have 
seen an enormous increase in auto employment in the United 
States. And we have not.
    Mr. McCrery. That begs the question, though. The fact is, 
we have not lost any jobs because of NAFTA. You state that we 
have a larger trade deficit with Mexico and that's true. But 
again, that avoids the central question of jobs. Trade, as you 
well know, is not a zero sum game. And yes, the deficit can 
grow. But that could mean that we have grown and they have 
grown more. And that's in fact what has happened.
    So the same thing is going to happen with China. And that's 
what all the experts have told us, except for the UAW and some 
other union folks. And I'm really trying to understand your 
genuine concerns here. But give me something other than the 
trade deficit with Mexico.
    Mr. Reuther. Mr. Congressman, with all due respect, I don't 
see how you can sit there and say that if our automotive defict 
with Mexico has grown from $3.5 billion to almost $20 billion 
that this doesn't translate into the loss of thousands of jobs 
that we should have had here in the United States.
    Mr. McCrery. It doesn't necessarily.
    Chairman Archer. Mr. Doggett--I'd like Mr. Doggett to be 
able to get his concerns on the record.
    Mr. Doggett. Mr. Abrams, do you share Mr. Reuther's 
analysis of the Levin proposal, or do you think it provides any 
valid alternative to address the concerns that you've raised?
    Mr. Abrams. I think it does address the kind of concerns 
that we've raised. We're looking for some kind of mechanism for 
constant monitoring, and it does address that.
    Mr. Doggett. And Mr. Reuther, you've heard and seen 
repeated frequently the comments of Mr. Woodcock. Is that 
basically just a difference of opinion?
    Mr. Reuther. Mr. Woodcock retired 23 years ago from the 
UAW. He's 87 years old now. During the last 23 years, he's 
devoted his life completely to China, first as ambassador, then 
as a private citizen. He's been an advocate for China 
throughout that period, even after Tiannamen Square.
    Mr. Doggett. I'd like to ask more, but given that the 
time's up, I understand your point and thank you very much. 
Thank you for your testimony, all of you.
    Mrs. Johnson. I thank the panel for their testimony very 
much. Very interesting morning. The hearing is concluded.
    [Whereupon, at 2:15 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]

Statement of California-Asia Business Council, Oakland, CA

    Position of California-Asia Business Council on the subject 
of PNTR for China

    California-Asia Business Council (formerly California-
Southeast Asia Business Council) is a non-profit business 
organization with some 90 members from throughout the state. 
Our member companies include some of Californias largest 
engineering and construction companies, major resource and 
electronics firms, as well as numerous small and medium-sized 
enterprises. A common thread among our members is their 
involvement in Asia, either through project participation, 
direct investment, trade, or financial linkages. Most of our 
members have significant business relations with the People's 
Republic of China, and look to growth in their China business 
as key to their growth strategies.
    Therefore, California-Asia Business Council strongly 
supports
    --China's accession to the World Trade Organization and
    --the waiver of China's ineligibility for Normal Trade 
Relations (NTR).
    We believe that improved conditions for commerce brought 
about by China's accession to the WTO and by the granting of 
Permanent NTR to China will benefit both California and China.
    For example, in 1998, California's exports to the PRC 
totaled $2.5 billion, which was 2.5% of total California 
exports. California's 1998 exports to the PRC increased by 9.2% 
over 1997, whereas California's 1998 exports to the world 
decreased by 4% in comparison with 1997. California/China two-
way trade translates into thousands of jobs and competitive 
consumer prices. The reductions in tariffs that will result 
from China's admission to WTO plus new domestic distribution 
rights throughout China will help American exporters and 
manufacturers.
    Additionally, our council believes that the alterations in 
business practices that China is undertaking in order to be 
eligible for WTO accession will bring welcome improvements to 
China's regulatory infrastructure that will make it easier to 
sell goods and services to China, and that the WTO will provide 
a multilateral forum to resolve disputes and achieve 
compliance.
    We also believe that accession to WTO will be beneficial to 
China's economic development, which is good not only for the 
Chinese people, but for California businesses that take part in 
the robust growth of this country of 1.2 billion people.
      

                                


Statement of Neil H. Offen, President, Direct Selling Association

    Mr. Chairman and Members of the Committee:
    The Direct Selling Association (DSA) thanks you for the 
opportunity to present testimony to the Committee today. DSA 
supports the expeditious approval of Permanent Normal Trade 
Relations (PNTR) for China. The Direct Selling Association 
(``DSA'') is a national trade association representing 
approximately 200 companies that sell their products and 
services by personal presentation and demonstration, primarily 
in the home. Our association members include some of the 
nation's most well known commercial names, such as Amway, Avon, 
Tupperware, Mary Kay, and Shaklee. The direct selling industry 
attracts individuals who seek job flexibility, with low startup 
costs and minimal work experience. Direct sellers typically 
sell to their neighbors, relatives and friends. Many direct 
sellers participate merely because they like a particular 
product and want to obtain discounts.
    While we refer to ``direct selling'' as an industry, in 
reality it is more accurately described as a method of consumer 
product and service distribution. In 1998, United States direct 
sales were almost $24 billion through 9.7 million independent 
salespeople. Estimated global retail sales for 1999 are in 
excess of $81 billion. The industry operates in more than 130 
countries and provides income opportunities to more than 33 
million salespeople. Most salespeople are women (approximately 
80%) and most work part-time and not year-round. On average, 
some 90,000 individuals are joining our industry's firms in the 
United States every week. Direct selling is a facet of the 
United States--China World Trade Organization (WTO) Accession 
Agreement (the Agreement) that may have escaped your attention 
and may shed some new light on the current debate.
    Direct selling companies provide income opportunities and 
training that are otherwise unavailable in China. Chinese 
direct sellers are taught how to run a business and manage 
people. Avon began doing business in China in 1981. Amway, Mary 
Kay, Sunrider and Tupperware soon followed reaching over 2 
million distributors in 1997 and almost $1 billion in sales. 
Unfortunately, the Chinese government banned direct selling in 
1998 requiring existing direct selling companies to modify 
their business models in order to secure new licenses and 
prohibiting the entry of new direct selling companies into the 
Chinese market. Four U.S. companies were re-licensed under the 
new regulations.
    Having to operate under vastly different circumstances has 
undoubtedly made business quite difficult for American direct 
selling companies. In fact, the companies operate differently 
in China than they do in any other country.
    The consummation of the Agreement last November 
resuscitates the direct selling industry in China. The United 
States Government went to bat for our direct sellers and hit a 
home run. The Chinese agreed to re-open their markets to direct 
selling, granting full market access by 2003. Equally 
important, China's entry into the World Trade Organization will 
subject it to a rules-based dispute resolution process, which 
would afford American companies the opportunity to challenge 
adverse Chinese governmental actions in a fair and impartial 
forum. Moreover, the Agreement permits American companies to 
import American products for sale in the Chinese market. This 
concession will preserve and, perhaps, encourage the creation 
of American jobs. There is no stronger argument that resonates 
with the American public. However, the United States and its 
direct sellers receive none of these benefits if the Congress 
does not approve PNTR for China.
    There are approximately 23,000 individual direct sellers in 
each Congressional district. The Agreement would allow any one 
that wanted to develop a marketing network in China the 
opportunity to do so, if the particular company permits 
development in this manner. Thus, approval of PNTR might 
provide an opportunity for one or more of your constituents to 
do business in China.
    To summarize, Mr. Chairman, if Congress approves PNTR for 
China, direct selling benefits in the following ways:

     the Agreement lifts the 1998 Chinese ban on direct 
selling--no later than 2003, U.S. companies will have full 
access to the Chinese market -1.2 billion consumers;
     Amway, Avon, Mary Kay, NuSkin, Sunrider and 
Tupperware, who are already in China, could revert back to 
traditional direct selling;
     companies that were ``frozen'' out of the market 
because of the ban would have a green light to enter China;
     all direct selling companies will be able to 
export to the Chinese market rather than be required to 
manufacture in China as is now the case;
     American companies would have legal recourse 
through the WTO dispute settlement procedures;
     for the first time ever, many American 
distributors could establish their own sales organizations in 
China--U.S. distributors benefit through ``cross-border 
sponsoring,'' earning income on the sale of products by the 
sales representatives they have recruited in China;
    If Congress does not approve PNTR for China, direct selling 
loses in the following ways:

     a market of 1.2 billion consumers remains closed;
     the direct selling ban remains in effect;
     direct sellers must continue as retailers or enter 
the market through retailing only;
     some U.S. companies are ``frozen'' out of the 
market; and
     American distributors are denied the opportunity 
to enter the Chinese market.
    We hope that the Committee will carefully consider this 
information as it debates PNTR for China. We respectfully urge 
the Committee to approve PNTR for China and to recommend to the 
full House that Congress approve PNTR for China. Thank you, Mr. 
Chairman for the opportunity to submit this testimony.
      

                                


Statement of Gary Benanav*, Chairman, Pacific Basin Economic Council

    As the House prepares to vote on extending permanent 
``normal trade relations'' status to China, members of this 
Committee and this body are confronted with an issue that is at 
once elegantly simple and extremely complex.
    Simple, because we are talking about making permanent a 
``normal'' status that China has already had for two decades. 
Simple, too, because the benefits inherent in China's 
commitments in joining the WTO are so profoundly in America's 
economic interests. And at the same time, this question is 
deeply complicated, because China is itself incredibly complex, 
and so are the feelings that we Americans have about that 
country.
    For those of us who support PNTR--and the U.S. Committee of 
the Pacific Basin Economic Council does support it, 
vigorously--the merits of a ``yes'' vote are absolutely 
compelling. Nonetheless, we appreciate the challenges with 
which many Members of this body will be confronted later this 
month. We also agree with many of the goals expressed by many 
of the opponents of PNTR. However, we believe those goals can 
be achieved more effectively and more quickly by granting China 
PNTR status, bringing it into the WTO and integrating its 
economy more deeply with the global economy.
    Much as been said and written about this issue. My aim is 
to provide the Committee with a perspective on why China's 
integration into global economic institutions is so important 
to a region--the Pacific Basin--in which the United States has 
so much at stake, economically and geo-strategically.
    PBEC is a multilateral business organization supporting 
economic growth in the Asia Pacific region through economic 
cooperation and trade and investment liberalization. The PBEC 
US Member Committee includes American companies with aggregate 
sales of over one trillion dollars, and employing more than one 
million people.
    In my capacity as chairman of PBEC/US, I am in regular 
contact with business leaders from all over the Pacific Rim. We 
work together to create business-led initiatives that link the 
region's economies together in dynamic and productive ways. Our 
meetings involve substantive dialogues about the challenges, 
opportunities, and trends facing our region. I can assure the 
Committee that no issue is considered more critical by PBEC 
members than ensuring China's stable economic evolution and its 
integration into regional and global economic institutions.
    PBEC's members approach the question of China's WTO 
membership from a variety of angles.
    First, of course, businesses throughout the region are 
intensely interested in expanded access to China's vast 
marketplace for goods, services and agricultural products. 
Continued growth and reform in China, coupled with the sluggish 
pace of growth in Japan, make access to the China market 
increasingly important for business in the region. PBEC 
members, in the United States and around the region, recognize 
that China has committed to a truly stunning series of steps to 
open its market to foreign goods, services, and investment. The 
bilateral WTO accession package negotiated by U.S. Trade 
Representative Barshefsky and her team is remarkable for the 
depth and breadth of market access improvements it contains. 
Because China's final WTO accession package will be based on 
the best market access offer for any particular product or 
sector, PBEC members are also closely monitoring China's 
negotiations with the European Union and other trading 
partners.
    In the product sector with which I am most familiar--life 
insurance--the commitment contained in China's accession 
agreements will mark a profound shift in the ability of 
American life insurers to establish businesses and sell 
policies throughout China. China's WTO membership will mean 
that companies like New York Life International can operate in 
a more certain and less restricted environment. The 
comprehensive scope of China's WTO commitments means that 
similar benefits will apply to PBEC members in virtually every 
economic sector, including telecommunications, food and 
agriculture, aerospace, and many others.
    Beyond the clear market access benefits, the regional 
business interests represented within PBEC also view China's 
WTO membership and PNTR as a boost for economic and political 
stability in the Asia Pacific region. The annual Congressional 
debate over NTR renewal, and the possibility that this status 
could be revoked, have been a constant source of concern to 
businesses in Hong Kong, Taiwan, and other Asia Pacific 
countries whose trade is increasingly intertwined with that of 
China.
    More broadly, business people in Asia have regarded the 
annual NTR debate as a sign of basic instability in relations 
between the United States and China. I cannot stress enough how 
much attention business people throughout the region devote to 
the dynamics of U.S.--China relations. It's important to 
understand that, when relations are rocky between two of the 
region's strategic powerhouses, ripple effects--in financial 
markets, trade, and other aspects of economic life--are felt 
throughout the region.
    No one in the region expects that differences between the 
United States and China would--or even should--disappear 
altogether as a result of China's WTO membership and approval 
of PNTR. Nonetheless, these steps would be seen as a positive 
sign of new stability in U.S.--China relations. And that would 
be a very good thing indeed for American economic interests 
throughout the Pacific Basin. A more stable U.S.--Sino 
relationship, combined with more economic contacts and 
transactions between companies and people on both sides of the 
Pacific, will actually increase America's ability to influence 
China positively on non-economic issues and policies where our 
two countries differ.
    Very much related to this issue of stability is the 
potential for China's WTO membership to facilitate the 
integration of this giant economy into global economic systems 
and institutions. As a growing economic power in Asia, China is 
an increasingly important player in regional trade and 
investment flows. By the same token, China represents growing 
economic and competitive challenges for businesses around the 
region.
    All of us in the Asia Pacific business community have a 
huge stake in encouraging China to be a cooperative, 
constructive, and fully integrated player in the region's 
economic affairs. Nothing is more critical to that objective 
than China's membership in the World Trade Organization. WTO 
membership will, by definition, bring China into a framework of 
rules, and procedures for enforcing those rules.
    Business leaders in the Pacific Basin recognize that even 
when China is in the WTO, there will continue to be bilateral 
trade conflicts between China and the U.S. and others, 
including small economies in the region. The WTO, through its 
dispute resolution processes, provides workable mechanisms for 
addressing specific trade tensions. Moreover, the WTO's 
multilateral system of dispute resolution strengthens the 
position of small countries in the region that might be 
unwilling to confront China on a strictly bilateral basis.
    In closing, PBEC members in the United States and around 
the region are keenly aware of the importance and implications 
of Congress' consideration of China's WTO accession in general, 
and the PNTR issue in particular. We appreciate this 
Committee's thoughtful leadership on an issue whose 
implications will be felt so broadly around our increasingly 
integrated region.
    *Mr. Benanav is Chairman and Chief Executive Officer of New 
York Life International.
      

                                


Statement of R. Theodor Kasiolek, President and CEO, Trans Global 
Network

    As you know, I have been working hard to facilitate the 
peaceful transition from defense production within the U.S., 
the Former Soviet Union, and the PRC to peaceful commercial 
endeavors. As President of TGN Associates International, I have 
been active in promoting global e-commerce and have been 
involved in several technology related ventures such as the 
High Technology City, Digital Town Halls, and fixed GEO space 
platforms for long distance learning and telemedicine.
    I have had the opportunity to work in building three 
Taiwanese start-ups in the Silicon Valley, attended MonteJade, 
and was a member of the Asian American Manufacturing 
Association. I have also worked with the PRC in developing 
investment opportunities in the area of Internet related 
technology infrastructures. I will be joining my team in 
Beijing next week to discuss developing a manufacturing 
facility for high-speed cable modems.
    As an adjunct Professor at Hayward State University, I 
asked my students what they thought about China being approved 
as a member of the World Trade Organization and also asked my 
close friends from the Asian American Community. This is my 
opinion at this time.
    The United States can not ignore the PRC because of the 
Internet which was incubated here in the Silicon Valley. The 
future of China's telecommunication is on the rise, but their 
government controls the Internet access. Internet is changing 
the way all people think and react as a global community. In 
1998, the PRC had 23 million Internet subscribers of which 4% 
were wireless and this grew to 30 million in 1999 in which 12% 
were wireless. The Global Internet is no longer a vision but it 
is a reality. We cannot ignore the power of the Internet for 
promoting economic growth, as we as the trustees of Democracy 
can not ignore the political issues such as human rights and 
the war threats made by the PRC against Taiwan, but we must 
separate these two elements. Politics and Economics just do not 
mix. Politically it took the United States over 200 years to 
evolve into its present state. The PRC(Peoples Republic of 
China) and the FSU(Former Soviet Union) are both struggling to 
understand democracy. We must all stand for a clear 
understanding on this one point; namely, the use of military 
force to take Taiwan is utterly unacceptable in a Global 
Internet-eCommerce based economy. However, we must understand 
that the PRC is reaching out economically for assistance and if 
the United States does not reach out and grasp their hands of 
friendships; then truly Europe or Japan will. Can we continue 
to ignore 25% of the Global population? As in the case of 
President Johnson's ``Great Society,'' we as a Great Power can 
not demand political correctness at the price of economic 
growth that will solidify this Nation's welfare for the next 
200 years. As we should have gained wisdom from the Vietnam 
War, the United States can not continue to play the role as the 
Police Power for the entire planet. I was in Vietnam with the 
United States Air Force, and had first hand experiences of what 
the effort created. Force never works for any Nation. Economic 
Development does.
    I have met with several delegations from the PRC that I 
introduced to the City Government of Palo Alto, California-the 
home of Stanford University and Hewlett-Packard. I watched as 
the Mayor of Tangshan eagerly asked about how the local 
Governments worked in the United States. The delegation had 
never seen a free and open exchange of ideas in the City 
Council Chambers. These business and government leaders from 
the PRC sat in the Chamber and were truly listening and 
motivated by the experience. From my perspective, the PRC is 
twenty years behind our Political and Economic System. However, 
we must filter out the political from the economic realities, 
while at the same time maintaining that as a member of the WTO, 
the PRC can no longer being doing business as usual in 
threatening war against its global partners.
    The WTO already has 135 countries who have been admitted. 
The WTO is promoting trade among its members through the use of 
the Internet. The benefits of using the Internet for improving 
efficiency for both government purchasers and suppliers is too 
powerful to ignore. The WTO's Internet procurement process has 
already resulted in competitive pricing and spirit.
    This is the age of an Internet global market economy that 
must include the Peoples Republic of China, but accession must 
be conditional. Membership must be on a trial basis and can be 
withdrawn if the conditions are violated. This transition 
period should be 12 to 24 months and will allow Taiwan and the 
PRC to begin to work together. Taiwan has the state of the art 
in chipset technology, aircraft technology, and computer 
technology. Taiwan can be like an older brother who lifts up 
his younger brother to mentor and to improve the knowledge of 
the younger sibling. We cannot expect this to happen overnight. 
Some memories, as we have seen in the Balkans, do not fade away 
with the advent of a new generation. By promoting economic 
advancement and accession into the WTO, the political wounds 
will heal. The PRC is quickly becoming the Hub of the New 
Internet Economy in the Pacific Rim. Already U.S. companies 
have heavily invested in the PRC; namely, Motorola, 
Lucent,Compaq, Cisco, 3COM, Hewlett Packard, Qualcom, Citibank, 
Federal Express, and Sybase.
    In conclusion, I would recommend the PRC's conditional 
accession to the WTO, but it should be made provisional in 
light of the Political and Economic challenges that the PRC is 
struggling with. The United States should be the key partner in 
assisting the development of the Internet infrastructure from a 
Governmental political assistance level, but the day to day 
economics should be left to the business community. We should 
not ignore Taiwan, our partner for over 50 years, but we should 
not reject the opportunity to recommend the PRC to be part of 
World Trade Organization's Global Economic promise that can 
only benefit the people of the Fourth Wave Economy.
      

                                


Statement of Robert A. Kapp, President, United States--China Business 
Council

Mr. Chairman, members of the Committee:

    The Ways and Means Committee continues its important 
service to the Congress and the public by this latest in an 
extensive series of Committee hearings exploring all aspects of 
the Congress's upcoming decision on ``PNTR''--i.e., the 
extension to the People's Republic of China of full WTO-member 
treatment upon China's accession to the World Trade 
Organization. Congress's approval of PNTR will bring home to 
American farmers, workers, companies, exporters, and consumers 
the equal opportunity to develop beneficial economic activities 
with China on the basis of the massive list of Chinese 
commitments to open its markets and abide by world trading 
standards that US negotiators won at the negotiating table 
after thirteen years last fall. Denial of PNTR would mean that 
all other WTO members, including the tough European and Asian 
competitors we face in China, would receive those opportunities 
to operate on new and more favorable terms in China, while the 
United States denied itself those opportunities. I am confident 
that the House will recognize the fundamental importance of 
this most essential issue in the PNTR debate, and approve PNTR 
solidly on these fundamental merits.
    The United States has, with the November 15 US--China 
Agreement on WTO accession, done more to bring about a far-
reaching shift in China's management of its own economy, in the 
direction of openness and reliance on the market, than any 
other US gesture or ``message'' has done since the 
establishment of diplomatic relations in 1979. With the 
approval of PNTR, the United States will place itself firmly on 
the side of market-driven reforms within China and on the side 
of China's enhanced commitment to abiding by the world's 
standards of behavior, on pain of multilateral sanction under 
WTO. For this reason as well, I am confident that the House 
will solidly support PNTR.
    Opposition to PNTR has, in fact, not centered on the 
economic content of the US--China Agreement, whose signing last 
November made good once and for all on the long-standing U.S. 
pledge to accept nothing short of a ``commercially viable 
agreement.'' It is worth noting, in fact, that many of those 
who now oppose PNTR were claiming as recently as last spring 
that US negotiators were prepared to ``cut a political deal,'' 
selling out American economic interests, for other non-economic 
or crudely political reasons. Now, with a splendid commercial 
agreement in hand, PNTR's opponents have launched a furious 
campaign to turn America's back on the nation's own economic 
victory.
    This Committee, and a long list of witnesses over several 
hearings, has explored in detail the terms of the US--China 
Agreement on WTO Accession, and I will not do so here.
    I wish, instead, to place into the record a number of 
statements that Members of Congress should read for themselves 
as they consider their individual votes on the PNTR question.

I. The views of Dai Qing.

    Dai Qing, a courageous and outspoken Chinese 
environmentalist, investigative journalist, and political 
critic, is winner of the 1993 Goldman Environment Award and the 
1992 Golden Pen for Freedom Given by the Paris-based 
International Federation of Newspaper Publishers. She was 
imprisoned in China for ten months in 1989 and 1990. Dai is 
best known in the United States for her eloquent campaign 
against the mammoth Three Gorges Dam Project on the Yangtze 
River in China. Recently, from Beijing, Ms. Dai wrote the 
following brief article, which appeared as an Op-Ed essay in 
the Los Angeles Times of April 20.

Dai Qing's article is extremely important, for the following 
reasons:

    1. It was written in Beijing, and provides the up-to-the-
minute, first-hand perspective of a world-renowned independent 
thinker who has suffered politically for expressing herself 
boldly;
    2. It takes clear exception to the approach to the PNTR 
issue by American labor organizations and the prominent Chinese 
political exile Wei Jingsheng;
    3. It is unsparing of the failings, as Dai perceives them, 
of the Chinese regime in both the human rights and the 
environmental arena.

Los Angeles Times, April 20, 2000
OP-ED Article
    Thursday, April 20, 2000
    Keep the Doors to China Wide Open
    Solidifying trade status would keep pressure on Beijing to 
improve on rights and the environment.
    By DAI QING

    BEIJING--I have heard on the news that two of the groups I 
admire most in the United States--the AFL-CIO and the Sierra 
Club--are against granting permanent normal trade relations 
status with China. They both organized large-scale activities, 
including mass demonstrations, to make their statements to 
American policymakers and to the public.
    As a Chinese environmentalist and human rights activist, I 
disagree with their position, although I am fully sympathetic 
with their causes.
    It is public knowledge that China is among the worst 
violators of labor rights and basic environmental standards. 
Walking on almost any street in almost any city, one can easily 
spot such violations: unemployed workers selling their old 
stuff, hoping to put some food on their family dinner tables; 
migrant workers sleeping under bridges and in construction 
sites, willing to take any job for a roof over their heads; 
water resources highly polluted by industrial waste; 
suffocating industrial pollution. Most government officials at 
all levels are so corrupt that they have become part of the 
pollution.
    The disagreement between me, together with many of my 
fellow human rights activists and environmentalists in China, 
and our counterparts in the U.S. is not over the principles of 
environmental protection and labor rights. Rather, the 
disagreement is with the means of improving human rights, 
including labor rights, implementing environmental protection 
and promoting democracy and freedom.
    I believe that permanent normal trade status, with its 
implication of openness and fairness, is among the most 
powerful means of promoting freedom in China.
    Wei Jingsheng, a prominent dissident now residing in the 
U.S., argues that in order to improve human rights conditions 
in China, the international community must constantly put 
pressure on the Chinese government. Wei is absolutely right 
about the international pressure, but he is wrong when he 
suggests that annual renewal of normal trade relations should 
be taken as an opportunity to provide such pressure.
    How does international pressure work in promoting human 
rights and environmental protection in China? I would like to 
argue that such pressure works only when doors are kept open, 
when pressure presents positive solutions and, above all, when 
engagement is involved.
    After the communist takeover in 1949, China was cut off 
from the rest of the world until it began to open up in the 
late 1970s. Millions of people starved to death or were 
persecuted, executed or otherwise deprived of the most basic 
human rights. International pressure either did not exist or 
did not work because the outside world had little information 
about what was happening. China had no need to respond to the 
international community.
    Starting in 1978, the open-door policy completely changed 
the way China responded to the world. Today, permanent normal 
trade relations is a powerful means to keep China's doors as 
open as possible.
    International pressure works better by providing positive 
solutions. Poverty promotes ignorance and negligence among the 
public to environmental issues and human rights abuses. With 
prevalent poverty in today's China, the government runs a 
successful propaganda campaign that argues that the right of 
economic survival overrides other human rights. The Chinese 
people are looking for positive support from the international 
community, especially the industrialized world. Permanent 
normal trade relations would send the Chinese people a powerful 
and positive message: The most powerful industrialized nation 
today will work with the Chinese people to build a new world 
order. This would put enormous pressure on both the government 
and the general public to meet the international standard not 
only on trade, but also on other issues, including human rights 
and environmental protection.
    International pressure works best when engagement is 
implemented. An American congressman once made the point that 
because China was not a normal state, it made no sense to treat 
it normally. Yet if the international community does not treat 
China normally, China will remain abnormal.
    Wei compares the annual renewal of trade status to the 
periodic renewal of a driver's license, which keeps China 
anxious to a certain level. This is exactly the most 
destructive way of thinking. The U.S. should never take the 
role of traffic police in world trade because China, or any 
nation, should not be subject to the naked authority of another 
nation. Instead, the U.S. should engage China in the process of 
becoming a full member of the international community. 
Permanent normal trade status would be an important part of the 
engagement plan.
(End)

II. Letter on PRC Labor Standards by US Experts on China's 
Economy and Society.

    The following letter by twelve American research scholars 
whose work has illuminated the complex realities of China's 
changing economic and social environment speaks, in its brevity 
and simplicity, to basic truths about China that the overheated 
rhetoric and doomsday claims of PNTR's organized opponents 
intentionally overlook. Members of the Committee and of the 
Congress can learn much from this statement.

PNTR, WTO and Chinese Labor Standards

 An Open Letter From American Academic Specialists on China's Economy 
                              and Society

    China's workers need higher labor standards, but opposing 
Permanent Normal Trade Relations for China is not going to 
help. To the contrary, China's participation in the WTO and the 
implementation of full WTO-member relations between the United 
States and China through the passage of Permanent Normal Trade 
Relations (PNTR) offer greater, more dependable prospects for 
progress on this long-term challenge.
    Normal trade relations in the context of China's membership 
in the World Trade Organization (WTO) are an important way for 
China to raise the standard of living of its people. WTO 
membership will also contribute to the development of a law 
based system in economic relations.
    China's low wages and often poor working conditions are 
mostly the result of China's poverty. Child labor similarly is 
more the product of families so poor that the small extra 
income these children bring in is important to family survival. 
China's failure to regularly and vigorously enforce its 
existing laws against child labor and poor labor standards 
reflects a system of law that is only slowly being 
reestablished after decades of neglect.
    With China on the brink of entry into the WTO, what is 
needed is an energetic effort to help China enforce its own 
laws and to strengthen its legal system in general. Efforts of 
this sort have been underway for some time through bilateral 
and multilateral public and private bodies and have already 
born modest fruit.
    Attempts to enforce labor laws by means of trade sanctions 
are by contrast a weak and blunt instrument for enforcing 
China's labor standards. Opposing PNTR and WTO membership for 
China would undermine the very forces that are contributing to 
rising standards for Chinese labor and enforcement of its 
existing labor laws. Denial of normal trading relations and 
resort to sanctions are also easily prey to abuse by special 
interests desirous of disguising their true protectionist 
purpose.
    Whoever may benefit from a sanctions approach to trade with 
China, it will certainly not be Chinese workers or their 
children.
    March 30, 2000

                    Signers (Listed Alphabetically):

    Loren Brandt
    Professor of Economics
    University of Toronto

    Author, ``Redistribution in a Decentralizing Economy: 
Growth and Inflation in China,'' Journal of Political Economy, 
April 2000; `` Markets, Human Capital and Income Inequality in 
China,'' forthcoming.

    Thomas R. Gottschang
    Associate Professor and Chair
    Department of Economics, College of the Holy Cross
    Research Associate, Fairbank Center for East Asian 
Research, Harvard University

    Editor: Du Runsheng, Reform and Development in Rural China 
(New York: St. Martin's Press, 1995); Co-author: 
``Institutional Change in Transitional Economies: The Case of 
Accounting in China,'' Comparative Economic Studies (Winter 
1998).

    Doug Guthrie
    Associate Professor of Sociology

New York University Author, Dragon in a Three-Piece Suit: The 
Emergence of Capitalism in China (Princeton, 1999); ``The 
Evidence is Clear: Foreign Investment Spurs Workplace Reform in 
China'' (Chronicle of Higher Education, March 2000).

    Gary H. Jefferson Carl
    Marks Professor of International Trade and Finance
    Graduate School of International Economics and Finance
    Brandeis University

    Co-editor, Enterprise Reform in China: Ownership, 
Transition, and Performance, 1999.

    Lawrence J. Lau
    Kwoh-Ting Li Professor of Economic Development
    Department of Economics
    Stanford University

    Co-author, ``China's Foreign Economic Relations,'' China 
Review 1997; ``The China-United States Bilateral Trade Balance: 
How Big Is It Really?,'' Pacific Economic Review, Vol. 3, No. 
1, February 1998; ``New Estimates of the United States-China 
Bilateral Balances,'', March, 1999.

    Barry Naughton
    Professor
    Graduate School of International Relations & Pacific 
Studies, University of California, San Diego

    Author: Growing Out of the Plan: Chinese Economic Reform, 
1978-1993 (Cambridge University Press, 1995); The China Circle: 
Economics and Technology in the PRC, Taiwan, and Hong Kong 
(Brookings Institution Press, 1997).

    Dwight Perkins
    H.H. Burbank Professor of Political Economy
    Harvard University

    Author, ``How China's Economic Transformation Shapes Its 
Future,'' in Ezra Vogel, editor, Living With China: U.S.--China 
Relations in the Twenty-First Century, WW Norton, 1997; China: 
Asia's Next Economic Giant, (Henry M. Jackson Lectures) 
University of Washington Press, 1986, 1989.

    Thomas G. Rawski
    Professor of Economics and History
    University of Pittsburgh

    Author, Economic Growth and Employment in China. N.Y.: 
Oxford University Press (for the World Bank), 1979; ``China: 
Prospects for Full Employment.'' Employment and Training 
Papers, no. 47. International Labour Office, Geneva. 1999.

    Bruce L. Reynolds
    Professor of Economics
    Union College

    Author, Chinese Economic Reform: How Far, How Fast? 
(Harcourt,1988); ``China's Integration into World Capital 
Markets'' (forthcoming); Editor, China Economic Review, Cornell 
University

    Scott Rozelle
    Associate Professor
    Department of Agricultural and Resource Economics, 
University of California, Davis Chair, Committee of 
Professional Relations with the People's Republic of China, 
American Agricultural Economics Association

    Co-author, ``China's Food Economy to the 21st Century: 
Supply, Demand, and Trade,'' Economic Development and Cultural 
Change, July 1999; Co-author, ``How China Will NOT Starve the 
World,'' Choice, First Quarter 1996; Co-author, 
``Liberalization and Rural Market Integration in China,'' 
American Journal of Agricultural Economics (May 1997).

    Ezra F. Vogel
    Henry Ford II Professor of Social Sciences
    Harvard University

    Author: One Step Ahead in China: Guangdong Under Reform 
(1989); Editor, Living With China: U.S.--China Relations in the 
Twenty-First Century (1997)

    Martin King Whyte
    Professor of Sociology and International Affairs
    The George Washington University

    Author, ``The Changing Role of Workers,'' in The Paradox of 
China's Post-Mao Reforms, ed. R. MacFarquhar and M. Goldman 
(1999); ``Human Rights Trends and Coercive Family Planning in 
the People's Republic of China,'' Issues and Studies, August, 
1998.

III. Statement by the American ``Creative Industry'' 
associations.

    The signers of this document are the very U.S. associations 
that led the battle with China over intellectual property 
protection in 1995 and 1996. While PNTR's critics point to 
continuing imperfections in China's intellectual property 
regime (as evidence that China does not abide by agreements) 
and demand that the US walk away from WTO-based trade relations 
with China, those whose interests are most directly affected 
call for the US to achieve WTO-based relations with the PRC, 
and they tell us why:

                           February 23, 2000

    An Open Letter In Support of China PNTR From America's Creative 
                               Industries

    America's creative industries strongly support 
Congressional approval of Permanent Normal Trade Relations 
(PNTR) for China.
    We are writing in response to suggestions that China's 
alleged failure to live up to its commitments under the 1995 
U.S.--China Intellectual Property Rights Agreement should 
disqualify it from membership in the World Trade Organization 
and from the benefits of full WTO membership treatment, 
embodied in PNTR.
    In the 1990s, America's copyright industries took the lead 
in pressing the case against China's serious violations of U.S. 
intellectual property rights; in particular, the massive export 
of pirate and counterfeit optical media and other pirated 
products throughout the world. Widespread abuse of intellectual 
property rights was causing billions of dollars in losses each 
year to American creative industries and to the U.S. economy. 
Working with the U.S. Government, we spared no effort to bring 
about the 1995 bilateral intellectual property rights 
agreement, and to ensure that China abided by those 
commitments, which resulted in the 1996 China enforcement 
``Action Plan.''
    Having worked so hard in the last decade to force the issue 
of intellectual property rights protection upon a reluctant 
China, why do we stand united in support of PNTR for China 
today?
     Because we are convinced from our own experience 
that inclusion of China within the framework of multilateral 
rules and obligations embodied in the WTO is the single best 
instrument we have to ensure continuing improvement in China's 
protection of intellectual property;
     Because we know, first hand, that multilateral 
enforcement through the WTO offers a far more promising method 
of ensuring continued progress in China's intellectual property 
environment than does the threat of unilateral retaliation 
against China;
     Because China committed in the WTO negotiating 
process to bring its copyright (and other IPR sectors') regime 
into compliance with its substantive and enforcement 
obligations under the WTO Agreement on Trade-Related 
Intellectual Property Rights (TRIPS), and to do so immediately 
upon accession. We believe China has commenced its efforts to 
meet this commitment.
     While piracy remains very high within the domestic 
Chinese market, China met its principal commitment under the 
1996 Action Plan--to stem the flow of exports that were 
disrupting other developed markets on a global basis;
     Because the US copyright sector, so critical to 
America's economic strength today, will cede to our global 
competitors the massive opportunities America has won at the 
negotiating table if the United States does not establish full 
WTO member treatment for China in the form of PNTR.
    In spite of real progress on intellectual property 
protection since the 1996 agreement, problems in China remain, 
as they do in many countries with which the U.S. trades. 
Chinese companies themselves, an increasing number of which 
likewise depend upon intellectual property protection, are 
recognizing the importance of Chinese adherence to 
international standards of protection, as embodied in the TRIPS 
Agreement. This trend will only accelerate through PNTR and 
Chinese accession to the WTO. Looking ahead, America's ability 
to address China within the framework of the WTO is a vital 
tool for the preservation of our economic rights and the 
advancement of our national interests.
    We are encouraged by the concern expressed about China's 
record on IPR enforcement and submit that the best way to drive 
improvements in Chinese performance is to approve PNTR, and to 
hold regular hearings to ensure that China is meeting its 
various obligations, including, in particular, the enforcement 
obligations that it will undertake pursuant to the TRIPS 
Agreement by which it will become bound.
    The companies and associations most vigorous in insisting 
on improvement of China's intellectual property rights regime 
over the past decade are united in support of PNTR in the year 
2000. We do not accept the suggestion that China's intellectual 
property track record since the signing of the 1996 bilateral 
agreement constitutes a justification for Congressional 
rejection of PNTR in the year 2000. Indeed, we believe that 
PNTR and the entry of China into the WTO will serve to advance 
the cause of intellectual property protection in China, a 
matter of considerable importance to America's creative 
workforce.
    We strongly urge Congress to support China PNTR in 2000.
            Sincerely,

Robert Holleyman, II
President and CEO
Business Software Alliance

Kathy Morgan
Chairman
AFMA

Hilary Rosen
President and CEO
Recording Industry Association of America

Patricia Schroeder
President and CEO
Association of American Publishers

Ken Wasch
President
Software and Information Industry Association

Douglas Lowenstein
President
Interactive Digital Software Association

Edward Murphy
President and CEO
National Music Publishers' Association

Eric Smith
President
International Intellectual Property Alliance

Jack Valenti
President and CEO
Motion Picture Association of America

I. A letter from China.

    The US--China Business Council recently urged member 
companies to invite their Chinese employees to write, in their 
own words, to the Council around the general questions of 
working for a US firm in China and the differences in their 
lives before and since joining their American company. We have 
received many letters. They are informative, sometimes very 
moving, and above all very encouraging. I offer members of the 
committee just two here, but will be happy to make many more 
letters available upon request to interested Members.

(1st letter)

    I've been working in a US multinational for more than 4 
years. Like many of my peers and friends, I share a same 
feeling that we have benefited so much in terms of living 
standards, career, personal capability and common beliefs and 
many more from its unique culture. We would gain more if we're 
more open up and receptive to the outside world.
    The most striking thing about the experience of working for 
a US multinational is that you would has an ever broad and new 
prospective to approach problems and look at things around.
    A key attitude shift took place when I entered, for it is 
where I realized the efficiency and effectiveness of a modern 
corporate system; where human resources and personal 
performance and initiatives are considered the most valuable 
assets; where mutual and equal respect and smooth communication 
is prevailing; where you will never be overlooked or judged 
simply by your title or position.
    No exception would there be that staff of a multinational 
would be impressed with the ample learning and self-challenging 
opportunities. It is no exaggeration to say a multinational 
company is a social university for personal maturity and 
aptitude growth, so to speak. Being exposed to a vastly 
adequate working resources and competent human talents keeps 
you being constantly motivated to enhance, learn and surpass.
    What is equally amazing is the harmony of different 
cultures. No matter what your skin color is, white, black or 
yellow, you would see friendship and hospitality overwhelming. 
Despite the vast difference of belief and cultures, staff in 
channel and contribute all their talents and efforts towards a 
unanimous goal of building business success and contribute to 
our kernel value --to be the most preferred supplier and most 
innovative enterprise.
    We may well believe this world would definitely be a better 
one through more communication and cooperation. People from 
every corner of the world could enjoy the sun light of peace, 
respect, and friendship as much as we have here within, a US 
multinational.
                                                  Jason Wei

(2nd letter)

To Whom may be concern:

    Hello! My name is Valerie Tang. I am an employee of a US 
based company in Shanghai. As a native Chinese, I am very 
concerned with the US Congress vote for the PNTR towards China. 
Here I just want to tell you how many things have changed in my 
life due to Chinese open door policy and working experience in 
US company.
    I was born in Xi'an. In 1992 I was assigned a job in a 
local radio factory in Shanghai after graduated from college. 
At that time, the factory's management was backward, the job 
was poorly paid, tedious and not intersting. My life was not 
easy. After trying several different jobs, finally I began to 
work for Shanghai Representative Office in 1998.
    The company provides me with comfort working environment. 
It also gives me exposure to professional HR /human resource/ 
practices. Meanwhile, it allows me to have access to foreign 
media including: magazines, newspapers and particularly 
Internet to get different perspecives of information. All this 
gives me a broader view and more balanced judgment of the 
outside world. Thanks to this I reached a deeper understanding 
of the mechanism of western democracies.
    Now, I have a sweet home, a meaningful career and a 
competitive professional profile. I enjoy the orchestras from 
Cleveland or Philadelphia on weekend. A simply Chinese lady 
like me could not realize any of these without the opening door 
policy as well as the US companies' investment in China.
    Dear Sir/Madam, my life is becoming better and better. My 
friends, my family and many people around me hope they have the 
same opportunity as I do. Considering the mutual benefits of 
both American and Chinese people, I sincerely wish you vote in 
favor of PNTR towards China. Thank you!
                                               Valerie Tang

II. A word about ``Leverage.''

    Mr. Chairman, one by one, the claims of the forces arrayed 
against PNTR in this endless campaign have dribbled away. The 
distracting argument that our 1979 bilateral trade agreement 
with China would bring the U.S. all the benefits that we won 
last November after 13 years of negotiations when China joins 
the WTO, even if Congress refused to approve full WTO-member 
treatment for China, has been discredited not only by the 
scholarly community but by the GAO and the Congressional 
Research Service. Flamboyant claims of 600,000, then 800,000, 
and now exactly 817,000 jobs to be lost if PNTR passes (i.e., 
if Congress ensures the same tariffs on Chinese imports in the 
future that it has maintained annually for the past twenty 
years) do not stand serious scrutiny, as the recent Institute 
of International Economics Paper (April 2000) by Dr. Gary 
Hufbauer makes clear.
    What is left is the ``leverage'' argument, i.e., that the 
United States can't afford to establish full WTO-member 
relations with China when the PRC enters the WTO, and thus open 
the doors to equal economic opportunities for Americans in 
China, because we would somehow lose ``leverage'' over China's 
domestic behavior if we passed PNTR.
    To be blunt, the ``leverage'' issue is an issue of 
convenience. Because it can never be conclusively shown to 
exist, it can live forever in some minds, and it can be used 
forever to pursue certain policy goals or agendas.
    It reminds me of the notion that if you stare at the sky 
long enough you will see flying horses. If you don't see them, 
it only means you haven't stared at the sky long enough. Keep 
staring.
    Let me put it simply: If China after twenty years of annual 
MFN/NTR review is as terrible a place, as full of iniquity and 
as offensive to our sensibilities as PNTR's organized opponents 
say it is, why would anyone in his right mind consign China to 
more of the very same American treatment that has in his view 
so totally failed to force China to change its behavior in the 
first place?
    In fact, there is more ``leverage'' in this WTO package 
than the United States has ever achieved with China before. 
China's agreement to open its economy to unprecedented levels 
of foreign participation; to abide by WTO prescriptions that 
strike to the heart of the way its economy will function and 
the way its regime will deal with its own citizens; to 
eliminate discriminatory conduct and develop transparency of 
procedure; to axe such offensive habits as the requirement that 
foreign companies transfer technology in order to do business 
in China or that they export their products from China--this 
commitment, backed by WTO provisions for dispute resolution and 
multilaterally-imposed sanctions represents a degree of real 
``leverage'' far more significant than the mythical power with 
which some PNTR opponents endow the current annual renewal 
exercise.
    Mr. Chairman, thanks to the work of this Committee, any 
Member of the House who wishes can have abundant access to the 
facts and the forceful arguments that the Committee's witnesses 
from government and private life have presented on the PNTR 
question. I appreciate the opportunity to offer the above 
ideas, and introduce their authors, to you, the Committee, and 
the House.
Thank you.
      

                                


Statement of Wei Jingsheng, Wei Jingshen Foundation, New York, NY

    The basic principles are simple.
    1. The U.S. should recognize that after the fall of the 
Soviet Union, Communist China is democracy's most formidable 
adversary.
    2. The remaining tyrannies in the world have no problems 
understanding that democracy is their enemy. Yet, the U.S. is 
unwilling to see tyranny clearly, and therefore fails in its 
leadership to build an effective coalition to contest 
democracy's greatest enemy. In contrast, Communist China has 
been very effective in splintering the Western democracies, and 
dividing American society.
    3. If the United States will not fight the world's largest 
tyranny politically, then inevitably, it will have to fight it 
economically, and eventually, militarily. Therefore, the only 
way to preserve peace and freedom begins by comprehending 
democracy's greatest enemy, and countering it effectively.
    Framing the debate on WTO and PNTR as ``keeping the door 
open'' is misleading. The truth is that the door to China is 
already half-open. The Chinese people are still deprived of 
information, but they have learned enough to know that they 
lack the rights other people enjoy. They have seen the vast 
differences between democratic societies and tyrannical 
societies. If this were not so, the enormous uprising in 
hundreds of Chinese cities known as the 1989 Tiananmen movement 
would never have happened. The truth is that the door to China 
remains half-closed, for the Chinese Communist government is 
afraid that the people will receive even more information. If 
we give China PNTR now, it will legitimize this half-open and 
half-closed status as the way things are and should be. If 
Communist China were to be certified as ``normal'' in its 
currently abnormal state, why would the government make further 
reforms?
    At this point, what the Chinese people need most is help 
from foreign friends in pressuring the Chinese government to 
provide better protection of human rights and the environment. 
Many say such ``open pressure'' does not work. This claim is 
fraudulent. South Africa, Taiwan, South Korea, and the former 
USSR are but a few examples of what open pressures can achieve. 
If we were to dissipate the pressure inherent within WTO and 
PNTR, then both the US and China, and other WTO countries will 
not have the free market they desire, but a ``chaotic market,'' 
from which few, beside the Chinese Communist tyranny, would 
reap any benefits.
    For interviews, contact: 202 547-7833, or fax: 202 543-4443

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