[WPRT 105-3]
[From the U.S. Government Publishing Office]
105th Congress WMCP:
1st Session COMMITTEE PRINT 105-3
_______________________________________________________________________
SUBCOMMITTEE ON TRADE
OF THE
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
__________
REPORT
ON
TRADE MISSION TO THE WTO MINISTERIAL MEETING IN SINGAPORE AND TO HONG
KONG AND THE PEOPLE'S REPUBLIC OF CHINA
JANUARY 29, 1997
Printed for the use of the Committee on Ways and Means by its staff
---------
U.S. GOVERNMENT PRINTING OFFICE
38-087 CC WASHINGTON : 1997
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 BARBARA B. KENNELLY, Connecticut
JIM BUNNING, Kentucky 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
JOHN ENSIGN, Nevada
JON CHRISTENSEN, Nebraska
WES WATKINS, Oklahoma
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
A.L. Singleton, Chief of Staff
Janice Mays, Minority Chief Counsel
______
Subcommittee on Trade
PHILIP M. CRANE, Illinois, Chairman
BILL THOMAS, California ROBERT T. MATSUI, California
E. CLAY SHAW, Jr., Florida CHARLES B. RANGEL, New York
AMO HOUGHTON, New York RICHARD E. NEAL, Massachusetts
DAVE CAMP, Michigan JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
WALLY HERGER, California
JIM NUSSLE, Iowa
(ii)
LETTER OF TRANSMITTAL
----------
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Trade,
Washington, DC, January 29, 1997.
Hon. Bill Archer,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
Dear Mr. Chairman: I am pleased to transmit to you the
enclosed delegation report on the recent Subcommittee on Trade
mission to Hong Kong, Singapore, and China. The report contains
an overview of the mission, summaries of meetings with foreign
and U.S. officials, and copies of several documents pertinent
to our mission. The delegation's visit was especially important
in light of the first Ministerial Meeting of the World Trade
Organization held in Singapore during our visit, the reversion
of Hong Kong to Chinese control in 1997, and a variety of trade
issues with respect to China, including its accession to the
WTO and its current conditional most-favored-nation status with
the United States.
The report describes the bilateral and multilateral
economic and trade issues which were investigated during the
trip. As the year proceeds with further consideration of the
U.S.-China trade relationship as well as issues relating to the
WTO, I hope that this information will be useful to you.
With best personal regards,
Philip M. Crane,
Chairman.
Enclosure.
MEMBERS OF THE DELEGATION
Members of the House of Representatives
HON. PHILIP M. CRANE, Chairman HON. CHARLES B. RANGEL
HON. JIM KOLBE HON. MICHAEL R. MCNULTY
HON. JENNIFER DUNN HON. KAREN L. THURMAN
HON. MAC COLLINS
Member of the Senate
HON. CHARLES GRASSLEY
Committee Staff
ANGELA PAOLINI ELLARD JANICE MAYS
MEREDITH BROADBENT BRUCE WILSON
KAREN HUMBEL
C O N T E N T S
__________
Page
Letter of Transmittal............................................ III
Members of the Delegation........................................ V
Overview of the Mission.......................................... 1
Administration Briefing En Route................................. 2
Hong Kong........................................................ 4
Singapore........................................................ 6
People's Republic of China....................................... 16
Appendix
A. Subcommittee press release announcing trade mission,
December 5, 1996............................................. 25
B. Survey by the American Chamber of Commerce in Hong Kong
entitled, ``1996 AMCHAM Business Confidence Survey''......... 26
Overview of the Mission
From December 5 through 17, 1996, a delegation of the
Subcommittee on Trade of the Committee on Ways and Means
visited Hong Kong, Singapore, and the People's Republic of
China to conduct a factfinding mission. The primary purposes of
the trip were to attend the first Ministerial Meeting of the
World Trade Organization (WTO), held in Singapore during the
time of the delegation's visit, to examine the bilateral
relationship with China and explore issues relating to Chinese
accession to the WTO, and to meet with Hong Kong Government and
business officials to discuss the reversion of Hong Kong to
Chinese control in 1997.
In Singapore, the delegation had the opportunity to
discuss WTO issues with delegations from other WTO member
countries, including Canada, the European Union (EU),
Singapore, and countries seeking to accede to the WTO,
including China, Taiwan, and Russia. The Ministerial Meeting
examined implementation of the WTO Agreements and the progress
made thus far in their nearly 2 years of operation. In
addition, the meeting addressed the ``built-in agenda'' already
set for further negotiation, additional market access
liberalization in selected areas, the working party report on
trade and the environment, the extended negotiations in
services, and potential new issues for further negotiation.
Most importantly, the meeting's greatest accomplishment was the
Information Technology Agreement (ITA), an agreement which
would eliminate tariffs in the information technology area. In
addition, the delegation met with the Prime Minister, Trade
Minister, and Foreign Minister of Singapore to explore
bilateral trade matters and issues relating to trade with the
Newly Industrialized Countries and with the countries in the
Asia-Pacific region.
While in Hong Kong, the delegation met with Hong Kong
Government officials and business representatives to discuss
the reversion of Hong Kong to Chinese control in July 1997. The
China leg of the trip provided the delegation an opportunity to
discuss the Chinese bid for accession to the WTO and the nature
of the bilateral trade relationship between the United States
and China including the current conditional most-favored-nation
(MFN) status.
See Appendix A for the press release announcing the
delegation's visit.
Hong Kong
On December 7, 1996, the delegation received an extensive
briefing from Consul General Boucher concerning political,
economic, and trade situation in Hong Kong and the prospects
for Hong Kong's future after reversion to Chinese control in
July 1997. The delegation then proceeded to the Consul
General's residence and met with officials from the Hong Kong
Government, the Legislative Council, various Hong Kong business
and political figures, and U.S. business representatives. On
Sunday, December 8, the delegation met with representatives
from the American Chamber of Commerce in Hong Kong to explore
their views on the reversion and how it might affect stability
and business opportunities in the region.
Singapore
On December 9, 1996, the delegation traveled to Singapore
to participate in the first Ministerial Meeting of the WTO.
While in Singapore, the delegation received briefings from
Acting U.S. Trade Representative (USTR) Charlene Barshefsky and
other U.S. Government officials. In addition, the delegation
met with delegations from Canada, Taiwan, the European Union,
and Russia. The delegation also met with senior officials from
the Singapore Government, including the Prime Minister, the
Trade Minister, and the Foreign Minister. During these
meetings, members of the delegation exchanged views on the
operation and implementation of the WTO, the negotiation of an
ITA, the treatment of labor issues and worker rights in the
WTO, negotiation of the accession of China, Russia, and Taiwan
to the WTO, market access and trade barriers in the textile,
agriculture, and paper industries, as well as trade issues in
the Asia-Pacific region. The delegation also met with
representatives from the National Association of Manufacturers
to discuss issues significant to U.S. businesses in the region.
The People's Republic of China
On December 12, 1996, the delegation traveled to Beijing,
China. After an extensive briefing by Embassy officials, the
delegation met with government officials concerning U.S.-China
trade relations. In particular, the delegation met with Vice
Premier Zhu Rongji, State Planning Commission Vice Chairman Gan
Ziyu, and MOFTEC Vice Minister Sun Zhenyu. These meetings
provided the delegation with an opportunity to exchange views
concerning Chinese accession to the WTO, the nature of the
trade relationship between the United States and China in
general and relating to the current conditional most-favored-
nation treatment in particular, the reversion of Hong Kong to
Chinese control, and various market access issues. In addition,
the delegation met with representatives from the American
Chamber of Commerce in China to obtain the perspective of U.S.
businesses on these issues.
Administration Briefing En Route
Briefing by Ambassador Lang
December 5, 1996
While en route from Washington, DC, to Asia, Ambassador
Jeffrey Lang briefed the delegation concerning the WTO
Singapore Ministerial Meeting. He explained that there were
four new issues under discussion by the ministers: the
relationship between labor issues and trade, competition
policy, investment, and the treatment of bribery and
corruption. He emphasized that these new issues were being
discussed apart from the negotiations on reducing tariffs in
the information technology industry.
With respect to labor issues, Lang stated that the
administration has a statutory mandate under the Uruguay Round
Agreements Act to seek to establish a working party on worker
rights within the WTO. He concluded, however, that a working
party would not be established because of opposition by a
number of U.S. trading partners. Instead, the administration
was seeking an ongoing process to address labor issues through
the WTO. Although the issue is controversial, he stated that
the countries in opposition to addressing the issue, including
the developing countries, do not see it as a tradeoff for the
ITA.
With respect to investment, Lang stated that the
administration's approach is to obtain a high quality agreement
through the Organization of Economic Cooperation and
Development before pursuing the issue within the WTO. The EU,
however, favors addressing investment within the WTO. The
likely outcome, Lang stated, is an agreement to discuss the
issue further.
As to competition policy, Lang stated that a global
antitrust agreement would lead to increased market access.
However, he noted that the Asians want to discuss weakening
antidumping provisions as part of the discussion, but the EU is
fundamentally opposed to discussing antidumping modifications.
Lang emphasized that the United States will not take a position
on this issue without discussing it with Congress first.
Finally, Lang stated that he was not sure how far
negotiations for transparency in government procurement would
go, but the issue would be raised in the future because it is
important for U.S. businesses.
Lang then briefed the delegation on the ITA. He stated
that a successful outcome of the ITA was important because it
would demonstrate that the WTO can move forward and would
provide an important momentum for the ongoing services
negotiations and the built-in agenda. He noted that the Asians
now were in basic agreement as a result of the recent APEC
meeting. He mentioned some of the more difficult issues in the
negotiations, including the EU opposition to including video
and audio software and the U.S. sensitivities on capacitors and
fiber optics. He also mentioned that the dividing line between
computer monitors and televisions was very controversial.
Lang then warned the delegation that in its meetings, some
of the representatives from foreign delegations would likely
criticize the United States concerning the Helms-Burton
legislation on Cuba and the Iran-Libya sanctions. He stated
that the administration has responded to such criticism by
stating that these are political and not trade issues because
of the effect on national security. He stated that the
administration intends to enforce these laws and simply ``will
not deal with pariah states.''
The delegation next discussed the importance of having
fast track rules in place. Lang mentioned that fast track is
essential for negotiations with Chile specifically and MERCOSUR
in general, trade relations with sub-Saharan Africa, and built-
in agenda negotiations. In addition, fast track is necessary to
teach the U.S. trade paradigm to the developing countries.
Chairman Crane raised his concerns relating to using fast track
to achieve labor and environmental objectives that are not
directly related to trade.
Hong Kong
Briefing by Hong Kong Consulate General
December 7, 1996
Consul General Boucher briefed the delegation concerning
developments in the Hong Kong reversion to Chinese rule in July
1997. He stated that the new Chief Executive would be selected
on December 11 and the Provisional Legislature on December 21.
He stated that the dissolving of the current elected and newly
reformed Legislative Council (LEGCO) and the establishment of
the Provisional Legislature in its place was ``unwise and
unnecessary.'' He said that the goal of the United States
during the transition was to assure that China keep its
commitments concerning Hong Kong.
Scot Marciel then briefed the delegation concerning Hong
Kong trade issues. Specifically, he mentioned that Hong Kong
would retain its memberships after the transition in the WTO
and in APEC. He also noted that Hong Kong was ``working well''
on the goal of achieving an ITA at the Singapore Ministerial
Meeting. He then mentioned some of the trade ``irritants''
between the United States and Hong Kong. One such concern
relates to the transshipment of textiles from China through
Hong Kong in an effort to avoid quota restrictions. Marciel
said that the Hong Kong authorities have now decided to ``crack
down'' on illegal transshipment and that he believes the issue
can be resolved if such enforcement efforts continue. Another
sensitive issue between the United States and Hong Kong relates
to the transshipment through Hong Kong of products that violate
U.S. intellectual property rights. The United States has urged
Hong Kong to halt retail sales of pirated materials and to
improve its already good intellectual property regime.
Dinner Hosted by Hong Kong Consul General
December 6, 1996
On December 6, 1996, U.S. Consul General Richard Boucher
hosted a dinner in honor of the delegation with Hong Kong
business and government officials to discuss the upcoming
transition to Chinese control on July 1, 1997. In general,
those in attendance held the view that China will work hard to
implement successfully the so-called ``one country, two
systems'' commitment, under which Hong Kong is to have
substantial autonomy in many areas. There are concerns,
however, that freedom of speech may be curtailed to some
extent, and that local government officials in Hong Kong may
create problems by trying too hard to curry favor with Beijing.
Working Session With American Chamber of Commerce in Hong Kong
December 7, 1996
On Saturday, December 7, the delegation, joined by Senator
Frank Murkowski (R-Ala.), met with a group of American business
representatives from the American Chamber of Commerce of Hong
Kong, headed by Chamber President Frank Martin.
This group expressed strong confidence in Hong Kong's
future, noting that a recent survey had found that some 95
percent of Chamber members expect the territory to continue to
be a good or very good place in which to do business after the
reversion to Chinese control on July 1, 1997. Observing that
``confidence crisis'' is unwarranted, Frank Martin said that he
fully expects Hong Kong to remain a bastion of free trade and a
center for international business and finance.
Mr. Martin discussed goals for the transition adopted by
the Chamber, which include: (1) preservation of Hong Kong's
legal system and the rule of law; (2) continued free flow of
information; and (3) maintenance of a competent and honest
civil service. He added that Chamber members regularly raise
these concerns with Chinese leaders, and had done so as
recently as the previous week during a visit to Beijing. He
believes their warm and positive reception during this visit,
as well as the open discussion of their concerns regarding Hong
Kong, resulted, at least partly, from the overall improvement
in the U.S.-Sino relationship since President Clinton met with
President Jiang Zemin in November.
Congressman Kolbe asked whether the Chamber was concerned
that corrupt business practices will seep into Hong Kong from
China during the transition to Chinese rule. Members of the
Chamber agreed that this was a valid concern which was being
addressed by many leaders in Hong Kong. For example, at Hong
Kong Governor Patton's behest, over 1,500 businesses operating
in the territory have adopted codes of conduct aimed at
stemming corruption. The Chamber has established several
education programs and participates in the Independent
Commission Against Corruption.
On behalf of the Chamber, Frank Martin urged the
delegation to pursue legislation to grant permanent most-
favored-nation tariff treatment to the products of China. The
Chamber's view is that it is time to do away with the annual
MFN debate which, he said, harms the relationship between China
and the United States to the detriment of U.S. business
interests in the region. Other Chamber members mentioned that
the greatest force in history for social development is
economic progress, and that an expanded U.S. business presence
in China is helping to improve conditions. Two executives noted
that U.S. investors in China apply international labor and
environmental standards, and thus raise the standards within
China.
Several Members of the delegation, particularly Chairman
Crane, agreed with this assessment, although they cautioned
that a majority of Members of Congress probably would not
support permanent MFN at this time because of continuing
tensions between China and Taiwan and Hong Kong's pending
transition to Chinese control.
Ranking Member Rangel urged members of the Chamber to use
their relationship with China to pressure the Chinese
Government to improve human and workers' rights. Chamber
members, he said, should actively communicate with U.S. workers
regarding the good that U.S. companies are doing in China. In
his view, the ``trust us to do the right thing'' argument is
not effective, and constituents who believe that American
businesses move jobs overseas to avoid U.S. standards have a
right to have their concerns taken into account.
Representing Caterpillar of China, Richard Kahler
supported continued pressure on the Chinese within the context
of permanent MFN trade treatment, as well as ongoing
negotiations for China to join the WTO. His company, he said,
is significantly disadvantaged in China, where it faces stiff
international competition as a result of the annual MFN debate.
Caterpillar also experiences problems with Chinese restrictions
on foreign investors and encounters numerous limitations
attached to channels of distribution.
Finally, the executives discussed what they believe will
happen during the transition to Chinese rule. They do not
expect to see arrests of demonstrators or shutdowns of
newspapers. The Provisional Legislature appointed by China will
be in place for 1 year until 1998, when a general election will
be held. Chamber executives do, however, expect some self-
censorship on the part of the press as journalists endeavor to
avoid offending authorities in Beijing.
See Appendix B for the 1996 business confidence survey
prepared by the Chamber.
Singapore
Meetings With Ambassador Barshefsky and Other U.S. Government Officials
December 9 and 11, 1996
The CODEL met with Acting U.S. Trade Representative
Charlene Barshefsky on two separate occasions in Singapore to
discuss U.S. strategy and objectives for the WTO Trade
Ministerial Meeting as well as U.S.-China trade relations. At
their initial meeting on December 9, 1996, Ambassador
Barshefsky noted that the U.S. delegation was working around
the clock with about 30 different countries to secure agreement
at the Ministerial on an ITA. The ITA would eliminate tariffs
among participating countries on a broad range of products
related to the information superhighway, including
telecommunications equipment, computers, semiconductors, and
software. Global trade in such products currently runs in
excess of $600 billion. Agreement on an ITA, if achieved, would
be the only concrete outcome at Singapore, Barshefsky said. She
urged the CODEL in its meetings with other countries while in
Singapore to underscore the importance the United States and
the U.S. Congress attached to concluding an ITA at the
Singapore WTO Ministerial.
At the same meeting, FCC Chairman Rex Hundt asked the
CODEL also to stress with other countries the need to improve
their offers in the ongoing WTO negotiation on basic
telecommunications services, which is to conclude in Geneva on
February 15, 1997. Hundt described the ITA as covering the
``cars and trucks'' of modern day communications while the
basic telecommunications services agreement is designed to
liberalize the ``road'' on which they travel by permitting
foreign investment in, and access to, a country's basic
telecommunications network. Hundt noted that world
telecommunications services revenues now exceed $550 billion.
In the United States, telecommunications-related jobs account
for two out of every three net new jobs created in the past 5
years. From a U.S. perspective, the objective of a WTO basic
telecommunications services agreement is to create greater
competition with foreign monopolies, which are currently being
underwritten, in effect, by U.S. consumers because of the way
current international accounting rates operate and a lack of
competition in their own markets.
On other Ministerial-related matters, Ambassador
Barshefsky was pessimistic that progress would be made to
reduce further tariffs on paper and wood products despite more
than 2 years of prodding by the United States leading up to the
Singapore Ministerial. The European Union is opposed to cutting
tariffs further on paper, and the Japanese are opposed to
cutting tariffs on wood products. As for seeking agreement to
form a WTO working party on trade and labor, as mandated by
section 131 of the Uruguay Round Agreements Act, Ambassador
Barshefsky doubted that such a working party would be achieved
due to strenuous opposition from developing countries, which
saw it as a protectionist gambit. Consequently, the USTR
delegation was now seeking a work program of cooperation
between the WTO and the International Labor Organization (ILO)
whose purpose would be to demonstrate that labor standards and
liberalized trade are mutually reinforcing. Such a WTO-ILO
program of cooperation is necessary, Barshefsky stated, to
rebuild public confidence in the value of trade agreements and
the world trading system.
Rich Romminger, Under Secretary for International Affairs
at the U.S. Department of Agriculture (USDA), advised the
delegation that the main U.S. agricultural objective for the
Singapore Ministerial was to ensure that all WTO member
countries are faithfully implementing their Uruguay Round
obligations. He expressed particular frustration with the EU
because the United States is forced to approach individual
member states to obtain adherence to their Uruguay Round
obligations on matters such as veterinary equivalence, rice,
and genetically grown corn and soybeans.
Ambassador Barshefsky and the CODEL also discussed U.S.-
China trade relations at length in preparation for the CODEL's
subsequent stop in Beijing. Barshefsky asked the CODEL to
reinforce President Clinton's recent message to the Chinese on
nuclear nonproliferation, human rights, North Korea, and WTO
accession. On WTO accession, the President told President Jiang
Zemin at the recent APEC meeting in Manila that the United
States wants China in the WTO, but it must be on commercially
reasonable terms. China needs to improve her offers on market
access and compliance with WTO rules and correct bilateral
trade problems on agriculture and intellectual property in
order to improve the confidence of Congress and the American
people in the Chinese ability to enter WTO on equitable terms.
Unfortunately, both the agricultural and intellectual property
rights problems with China are worsening. On intellectual
property rights, although the Chinese have closed 17 of 32
illicit but identifiable CD-manufacturing plants, the number of
illicit underground factories has increased to around 60 or 70.
Barshefsky asked that the delegation encourage the Chinese
authorities to locate these underground factories and close
them. If they cannot find them, at a minimum they must stop the
export of the illicit CDs. Underground CD-producing factories
are particularly troublesome, she stated, because they can be
relocated in a mere 10 hours and are run by Chinese, Hong Kong,
and Taiwanese criminal gangs.
In the CODEL's second meeting with Ambassador Barshefsky
on December 11, 1996, she reported that she had struck a basic
deal on the ITA the previous evening with her EU counterpart,
Sir Leon Brittan, but that he had not yet gotten final member
state approval because of resistance from France, Spain, Italy,
Greece, and the Netherlands. Failure to gain EU Council
approval for the deal at this juncture, she stated, would make
it more difficult to bring on the Asian countries by the end of
the Ministerial conference, but not impossible. She noted that
the ITA product coverage would exclude optic fiber, fiber
components, and television tubes, but would include fiber
cable, digital photocopiers, and capacitors. As for the
definition of computer monitors to be covered by the ITA, it
would include a footnote for dealing with the thorny issue of
HDTV. On agriculture, it now seemed unlikely that the Argentine
proposal to accelerate preparatory work for the next phase of
agricultural negotiations, to be started in 1999, would be
accepted.
Returning to the matter of the CODEL's upcoming visit to
Beijing to discuss U.S.-China trade relations, Ambassador
Barshefsky reiterated the need to stress the need to reverse
the growing bilateral trade deficit with China by increasing
access to the Chinese market. Overall 1996 exports from the
United States to China are flat, and agricultural exports are
down 37 percent, despite the fact that the Chinese economy grew
12 percent this year. Ambassador Barshefsky also reported that
an EU proposal to issue a Quad statement at the Singapore
Ministerial favoring the notion of some type of ``conditional''
Chinese accession to the WTO had been soundly rejected by the
other Quad countries.
Ambassador Barshefsky and the CODEL also discussed the
recent Export-Import Bank rejection of the Three Gorges Dam
project in China. In response to questions from Chairman Crane,
she mentioned some of the problems associated with the project,
including the forced and unplanned relocation of over 1 million
people, environmental degradation, downstream and upstream
effects, financial viability, and no guarantee that the project
would ever be completed. Accordingly, the administration
recommended that Eximbank not finance the project.
Finally, regarding the issue of permanent most-favored-
nation trading status for China, Ambassador Barshefsky
suggested that the CODEL indicate that it would welcome
permanent MFN for China, but as part of a successful WTO
accession package.
Prior to leaving Singapore on the morning of December 18,
1996, the CODEL was briefed by Deputy USTR Ambassador Jeff Lang
on the state of the negotiations on the ITA and the Ministerial
Declaration. Ambassador Lang reported that agreement on an ITA
was at hand but was being held up over continued disagreements
in the Ministerial Declaration on trade and labor. He noted
that agreement has been reached on an ad referendum basis on
language in the declaration on investment, government
procurement, and competition policy, as well as on textiles and
agriculture. However, the United States would not sign off on
the declaration as a whole until it was satisfied with the
language on trade and labor.
Meeting With Singapore Minister of Trade and Industry Yeo Cheow Tong
December 10, 1996
Chairman Crane opened the meeting by congratulating
Minister Yeo on the Ministerial. He noted that consummating the
ITA during the Ministerial should be the highest priority of
the meeting. He also mentioned the basic telecommunications
services negotiations and market access for paper products as
being high priorities. In response, Minister Yeo stated that
Singapore is very supportive of the ITA.
Ranking Member Rangel stated his concern that all people
enjoy the benefit of free trade and that a discussion on labor
rights is important so it is clear that free trade is not
intended to benefit merely a few. He stated that he supported
``at least some working force'' to monitor this issue. He said
that he would appreciate Singapore's leadership in assuring
that this issue was addressed, saying that to do otherwise
would be ``a cruel indictment'' of what the WTO stands for. He
stated that it would help increase support for free trade if
workers felt that their concerns were being addressed.
Congresswoman Thurman echoed these views. Congressman Kolbe
responded by stating that there are differences within Congress
on this issue and that he favors addressing this issue through
institutions that already exist instead of through the WTO.
Minister Yeo stated in response that he hoped the WTO members
could develop a compromise on this issue. He said that there
was unanimity that workers' welfare is important and that labor
issues should not be used as a protectionist tool. He said that
the language being discussed for insertion in the Ministerial
Declaration was not as strong as he prefers but that it
represents a compromise.
In response to questions from Chairman Crane, Congressman
Kolbe, and Congresswoman Dunn, Minister Yeo updated the
delegation on the status of the ITA negotiations, noting that
there were still some outstanding issues but hoped they would
be resolved quickly among the four ``Quad'' countries so that
other countries would have an opportunity to join the
agreement. He stated unequivocally that ``there will be an ITA
agreement.''
Senator Grassley then asked for Singapore's help with
bilateral disputes on agriculture between the United States and
the EU, particularly relating to sanitary and phytosanitary
measures without a scientific basis. Congressman Collins raised
the issue of market access on paper and wood.
With respect to basic telecommunications services
negotiations, Chairman Crane stated his hope that the Singapore
telecommunications industry be opened further. Minister Yeo
responded by saying that Singapore has been moving very
aggressively in the right direction and was awarding
compensation to its shareholders to shorten the life of the
telecommunications monopoly.
Meeting With European Parliamentary Delegation
December 10, 1996
Congressmen Kolbe, Collins, Dunn, and Thurman and Senator
Grassley met with a group of members of the European
Parliament. Congressman Kolbe opened the meeting by emphasizing
the importance of concluding the ITA. He also noted the
differences within the delegation as to the treatment of worker
rights within the WTO.
Willy deClerq of Belgium responded by stating that two
priorities of the European Parliament relate to labor rights
and environmental issues. He stated that he was very much
disappointed in the language being discussed for the
Declaration because it indicated a lack of willingness to talk
about worker rights, which in turn has domestic political
impact. As to investment and competition policy, he noted his
disappointment that there will be no quick negotiations. He
stated that the EU is not ``lagging behind'' in the ITA
negotiations because it wants to open this market immediately.
The problem, he noted, was in obtaining other signatories. In
response to a question from Congressman Kolbe, he said that the
coverage must be as broad as possible.
Concerning the basic telecommunications services
negotiations, Carlos Pimenta of Portugal stated that the U.S.
opening of the satellite market is critical. He supports quick
telecommunications privatization in Europe, stating that the
high price of telecommunications services in Europe amounts to
a ``tax'' on trade. The German Bundestag representatives stated
that the goal in Germany is to privatize by 1998.
Senator Grassley next raised agriculture issues, asking
the Parliamentarians whether they supported beginning
negotiations on agriculture within the WTO by 1999. DeClerq
responded by stating that he supports implementation within the
timeframe set forth in the built-in agenda. Senator Grassley
then inquired about European practices relating to sanitary and
phytosanitary measures, asking whether the Europeans were
``ignoring'' their obligations that such measures have a
scientific basis with respect to BT corn, hormone-fed cattle,
and pet food. Pimenta responded by saying that the hormone
issue was not a political question and that the EU negotiators
have no instructions to block the negotiations. As to BT corn,
he said that the consumer is entitled to know whether BT corn
has been mixed in with BT-free corn. Mr. Kittelmann of Germany
noted that this issue is highly emotional.
Congressman Kolbe then raised the Helms-Burton
legislation, cautioning that if the EU takes the issue to WTO
dispute settlement, the outcome could be dangerous if the
United States claims the national security exemption in
response. Such a move, he added, would lead to an erosion of
WTO obligations as countries used the national security
exemption readily. Senator Grassley stated that there was no
political will in Congress to amend the legislation but that in
his view the provisions would not be used. Congressman Kolbe
stated that it would be helpful if Europe would do more to
assure democracy in Cuba.
Congressmen Collins and Dunn next asked the
Parliamentarians for assistance in the acceleration of
decreased tariff on paper. DeClerq stated that the Parliament
has no position on the issue because it has not addressed it.
The delegation shared some written materials on the issue.
Senator Grassley asked the Parliamentarians for their
views on China's accession to the WTO, noting his perception
that Europe wants China to accede more quickly than other
trading partners. DeClerq stated that he does not support
Chinese accession ``at any cost'' and that China must fulfill
certain conditions before entry should be permitted.
Mr. Pimenta then asked about environmental issues,
encouraging the United States to support a unified approach on
these issues and to work with the EU on legislation such as
turtle excluder devices. Congressman Kolbe responded by stating
that legislation removing the ``tuna/dolphin'' ban is a very
high priority for the 105th Congress because current law is
inconsistent with U.S. international obligations.
The meeting concluded with an agreement between the two
delegations to strengthen an interparliamentary relationship
between the United States and the EU.
Meeting With Canadian Parliamentary Delegation
December 10, 1996
The CODEL met during the afternoon of December 10, 1996,
with a Canadian delegation composed of both Canadian
Parliamentarians and Canadian Government officials. Chairman
Crane opened the meeting by outlining U.S. objectives for the
Singapore Trade Ministerial, particularly the ITA, improved
offers on basic telecommunications services and financial
services, and reduced tariffs on wood and paper. The members of
the Canadian delegation responded that their priorities for the
Ministerial were the ITA, improved offers on financial
services, and agreed language in the declaration on investment
and core labor standards. On the issue of China's accession to
the WTO, Chairman Crane noted that while the United States was
willing to provide a reasonable transition period for China,
the time limits for Chinese transition to full adherence to WTO
standards must be clearly established. The WTO would be a much
different organization with China as a member. Senator Grassley
stressed that it is important to win the major battles with
China before it enters the WTO since it will be a formidable
agricultural competitor. The Canadian side agreed that the WTO
should not lower the goalpost for China's WTO admission and
stated that agriculture is a major priority for Canada in the
negotiations.
The meeting also touched on the respective problems the
United States and Canada were having in their bilateral
agriculture trade with the EU. Senator Grassley noted, in
particular, that the EU was blocking U.S. exports of
genetically engineered corn and soybeans.
Returning to the draft Singapore Ministerial Declaration,
the Canadian side asked to what extent the U.S. position on
labor was being driven by internal U.S. political opposition to
free trade. Congressman Rangel replied that, if the WTO ignored
labor standards, it would be more difficult to sell free trade
to the American public. Instead, he said, trade must be shown
to benefit all to be politically sustainable. Chairman Crane
stated that the Republican position was not to link labor and
environment matters to trade unless they were directly and
immediately related to trade. General labor issues should be
dealt with in the ILO. The Canadians said they could accept the
Director General's draft language on core labor standards but
not much less. The Canadians asked if the United States was
still supportive of the North American Free Trade Agreement
(NAFTA), to which the reply was yes.
During the course of the meeting, a Canadian
Parliamentarian noted in an aside that he had recently been to
Russia. He described the economic situation there as chaotic.
Three and a half million people are in internal migration due
to economic dislocation resulting from the economic reforms of
the country. ``People are sleeping in boxcars,'' is the way he
sadly summed up the state of affairs.
Meeting With Singapore Prime Minister Goh Chok Tong
December 10, 1996
The delegation met with Prime Minister Goh and discussed a
broad range of issues including the progress of the WTO
Ministerial Meeting and China's future role in the region.
Meeting With Mr. Vincent Siew, Leader and Former Economic Minister,
and the Parliamentary Delegation of Chinese Taipei
December 10, 1996
On behalf of the delegation, Chairman Crane expressed
strong support for the rapid accession of Taiwan to the World
Trade Organization, indicating his belief that Taiwan's trade
regime is very close to being in compliance with WTO
requirements. He said he was optimistic, in light of improving
relations between China and the United States evidenced by the
tone set at the recent meeting between President Clinton and
President Jiang Zemin, that an expeditious arrangement might be
found so that Taiwan could join the WTO as a developed country.
Echoing support for Taiwan's WTO accession, Senator
Grassley nevertheless cautioned that further progress had to be
made to reduce barriers to imports of agricultural products
such as beef, poultry, and pork. Ranking Member Rangel urged
Taiwan to follow through on its commitment to joint the
Government Procurement Agreement at the same time that it
accedes to the WTO.
Speaking for the Taiwanese people, Mr. Vincent Siew,
Leader of the Parliament and a former Economic Minister,
expressed the strong desire of the Taiwanese people to be
accepted into the WTO as soon as possible. Responding to
Senator Grassley, Mr. Siew said he did not ``see any problem''
in making the necessary agricultural reforms. He thanked
Congress for passing a resolution in 1992 that pushed the
administration to actively seek Taiwan's membership in the
General Agreement on Tariffs and Trade (GATT). The resolution,
he said, succeeded in getting Taiwan's application on the GATT
agenda, which was a great accomplishment.
Mr. Siew expressed regret, however, that the negotiating
process has slowed down. Whether or not there is a political
linkage, he said, the Taiwanese people believe it is unfair for
Taiwan's case to be delayed because of USTR's preoccupation
with China's application. He asked the delegation to urge USTR
to expedite Taiwan's negotiation so that ``everything is
ready.'' Taiwan wants to complete the process soon, he
stressed. ``We have been kept waiting too long.'' Chairman
Crane observed that now that the U.S. Presidential election has
passed, the administration will be able focus more on advancing
Taiwan's application to join the WTO. Mr. Siew observed that
China can make relations difficult due to the government's
proclivity to ``shoot at its own foot.'' Jiang Zemin, he said,
is working gingerly to dismantle the government's control of
people's lives on the mainland.
Meeting With Russian Delegation
December 10, 1996
The CODEL met on the afternoon of December 11, 1996, with
an 11-man Russian delegation attending the Singapore WTO
Ministerial in an observer capacity. Russia currently is
negotiating on accession to the WTO. After Chairman Crane
outlined U.S. objectives for the Ministerial Meeting, the
Russian delegation described the current economic situation in
Russia. They noted that Russia is undertaking political and
economic reforms simultaneously. The recent reelection of
President Yeltsin reaffirmed popular support for these reforms.
The main economic reforms are being carried out as part of the
budget process in Russia. In this regard, Russia hopes to
reduce its central government deficit from 3.5 percent next
year to 2 percent by the year 2000. Inflation has been cut from
100 to 20 percent this year, with the governments aiming at 11
percent next year and 5 percent by 2000. After years of
declining production, GNP has begun to grow again--by 2 percent
this year and 6-8 percent by the year 2000.
Congressman Rangel asked what the CODEL could do to be
helpful to Russia to facilitate its transition to a democratic
country. The Russian side asked for help in obtaining
additional International Monetary Fund (IMF) financing and
revising IMF monitoring practices of Russian economic reforms
from a monthly to a quarterly basis. Congressman Rangel said he
would try to help and asked the Russians to have the Russian
Ambassador in Washington contact him when he returned to the
United States.
The Russian side asked what could be done to remove Russia
from the strictures of Jackson-Vanik and be given permanent
MFN, which would be useful in creating a more stable bilateral
trade relationship and attracting foreign investment to Russia.
Congressman Rangel noted that this was a very difficult
political issue and opined that maybe something could be done
as the two sides moved closer together, although this would
take additional time. The Russian side also asked whether
Russia could be treated as a market economy under U.S.
antidumping law. They explained that currently, Russia is
treated as a nonmarket economy, which does not reflect reality
and leads to higher margins of dumping against Russian imports.
Congressman Rangel noted that Russia could be administratively
reclassified as a market economy under the current law if it
satisfied the legal criteria for a market economy country.
Russia should take this up directly with the Assistant
Secretary of Commerce for Import Administration, he stated.
Meeting With Singapore Foreign Minister Jayakumar
December 11, 1996
Minister Jayakumar welcomed Senator Grassley, Congressman
Rangel, and Congressman Kolbe, stating the importance of
legislative contacts to bilateral relationships. He noted that
Singapore advocates the U.S. involvement in the region, and
U.S. presence is a major factor in the stability of the region.
Senator Grassley commended Singapore for its leadership in the
Ministerial. He and Congressman Kolbe emphasized the importance
of concluding the ITA at the Ministerial, encouraging Singapore
to do what it could to assure this outcome. Minister Jayakumar
stated that the United States and Singapore are in agreement
over the importance of free trade in general and the ITA
specifically. He emphasized that Singapore, as the chair of the
Ministerial, must appear impartial and neutral. However, in its
role as an individual country, it will proceed with like-minded
delegations to bring countries to the ITA.
Ranking Member Rangel stated his concern that all people
enjoy the benefit of free trade and the importance of labor
rights in this regard so that trade does not benefit merely a
few. Congressman Kolbe noted that there are differences within
the delegation concerning labor rights. He reiterated the
importance of concluding the ITA during the Ministerial. In
response, the Minister stated that Singapore would support
phasing out ITA tariffs within the timetable that the United
States supports, although there would be no common ASEAN
position on timetable. Finally, Congressman Kolbe asked the
Singapore Government to make a strong statement about
concluding the basic telecommunications services negotiations
by the deadline next year.
In response to a question from Ranking Member Rangel
regarding the U.S.-China relationship, the Minister stated that
the world must accept that China is a major economic power, but
that China, in turn, must observe the ``rules of the game.''
Specifically, territorial claims to the South China Sea must be
resolved according to international rules. He noted that the
United States should engage China but that it cannot contain
China. Instead, the goal should be to assure stability in the
region. Senator Grassley and Congressman Kolbe asked whether
China should be permitted to enter to WTO under special
circumstances. Mrs. Seet-Chen of the Ministry replied that
China should not accede to the WTO on its own terms but that it
must negotiate transitions.
Senator Grassley then raised the subject of agriculture
trade, noting that China would be given a tremendous advantage
if it were permitted a special arrangement in agriculture,
wiping out all gains in the global regulation of agriculture.
The Minister said in response that this would have to be
negotiated.
Congressman Kolbe then asked about foreign policy issues
within the region. The Minister described the possible
flashpoints in the region: (1) Korea; (2) South China Sea; and
(3) the China-Taiwan relationship. As for Korea, he noted that
little information is known at this time. He mentioned that it
may not be in China's best interest to have a unified Korea
with a nuclear arsenal. However, he further noted that the
extent to which China has leverage in the area is unclear.
With respect to the South China Sea, the Minister stated
that the issue must be managed so that it does not erupt. To
the extent that the area has important routes, resolution on
passage and overflow must be obtained. After Congressman Kolbe
asked whether there could be a valuable U.S. role in the
region, the Minister stated that the United States can best
help by fostering an international forum where countries can
discuss the issue, such as the ASEAN Regional Forum. Ambassador
Nathan pointed out that China was comfortable with the forum
because it is ASEAN-driven and not an initiative of the United
States. He cautioned that now is not the time for the United
States to be too active.
Finally, concerning Taiwan, the Minister stated that
Taiwan must be patient and should give a signal that it is not
seeking independence. For example, it might reconsider its bid
to seek United Nations membership.
In conclusion, Congressman Rangel stated that it is
difficult to think that China is dwelling on past sensitivities
when it has so many opportunities before it. Instead, he said,
we should now move forward. Ambassador Nathan noted the
importance of tradition and the memory of the past with the
Chinese people.
Alan Larson, Assistant Secretary of State for Economic and Business
Affairs
December 12, 1996
Prior to departing for Beijing for Singapore, the
delegation met with Assistant Secretary of State Alan Larson to
discuss Secretary of State Warren Christopher's recent trip to
China.
In meetings with President Jiang Zemin and Premier Li
Peng, Secretary Christopher made the following points: (1) the
U.S. supports Chinese accession to the WTO and is willing to
consider appropriate transition periods for some obligations;
and (2) the recent Chinese standstill commitment (to impose no
new WTO inconsistent laws or policies) is welcomed by the
United States as a sign of seriousness with regard to assuming
WTO obligations.
Assistant Secretary Larson said that both Chinese leaders
responded that China is opening its economy, and that both the
United States and China must make concessions, but that China
will not agree to measures which undermine her fundamental
economic interests. China has reduced tariffs from an average
rate of 35 percent to 23 percent and will reduce tariffs
further to an average rate of 15 percent upon accession to the
WTO. These two Chinese leaders told Secretary Christopher that,
at the top political level, China is prepared to wait to join
the WTO ``until the time is right.''
Assistant Secretary Larson views Chinese barriers to
imports of agricultural products as a serious systemic problem
which fuels political difficulties in the United States because
of the importance of agricultural exporters to maintaining the
free trade coalition in Congress. For example, China fails to
apply a sound science standard consistent with the WTO's
Sanitary and Phytosanitary Agreement for imports of citrus
fruit, grapes, beef, Pacific Northwest wheat, and stone fruit.
China currently imposes a ban on imports of poultry.
With regard to the protection of intellectual property
rights, China has taken important strides toward creating an
effective system, Larsen stated. Progress has been made in
stemming the piracy of compact disks, especially of sound
recordings. However, China needs to make additional progress on
market access for sound recordings, computer software and
motion pictures, he said. A key problem is the proliferation of
underground factories in south China which are exporting
computer software. The administration has urged the Chinese to
step up efforts to shut down these illegal ventures, many of
which are run by international organized gangs.
Textiles is another area in which the administration has
asked the Chinese to improve enforcement. Within the context of
negotiations to extend the U.S.-China bilateral textile
agreement, which will expire December 31, 1996, the two parties
have exchanged proposals regarding improved market access,
anticircumvention measures, improved administration of the
agreement through electronic exchange of export licensing
information, and measures to verify compliance with rules of
origin.
People's Republic of China
Briefing by U.S. Embassy Officials, Beijing
December 13, 1996
The CODEL received an extensive briefing by the U.S.
Embassy economic staff on current developments in the Chinese
economy and in the Chinese foreign trade regime. Current
unemployment in China is 10-15 percent by U.S. standards, with
20 million entering the job market every year. One hundred ten
million people are employed in state companies, or one-sixth of
the total workforce. Eighty percent of all employed Chinese
still work in agriculture.
Current per capita income is estimated at $650 per year.
The World Bank recently estimated that 350 million Chinese
still live below the poverty line. Regional income disparities
are significant with per capita income in the richest areas
12\1/2\ times as high as per capita income in the poorest
areas. China has a high savings rate but many startup companies
have difficulty obtaining funds locally due to the inefficiency
of financial intermediaries in China.
As for foreign trade, 20 percent of Chinese GDP is
exported ($150 billion out of a $700 billion economy),
including 30-40 percent of industrial output. Seven percent of
total Chinese output is exported to the United States. Forty-
one percent of Chinese exports are attributed to foreign
investors in China. This has led to a burgeoning trade surplus
with the United States as Taiwan, Hong Kong, Singapore, and
Korean companies have moved export operations to China. In this
regard, China's trade surplus with the United States in 1988
was $3-4 billion, while that of the Asian tigers was $35
billion. In 1996, these figures have been reversed.
The Embassy pointed out that the Chinese argue that their
trade surplus is due in large part to U.S. export controls and
trade data discrepancies. For example, there are 13 U.S.
statutes that impede U.S. exports to China (largely relating to
Tiananmen sanctions). Moreover, the Chinese would like to
purchase nuclear power stations from the United States but are
precluded from doing so.
The Embassy suggested that the CODEL stress the political
volatility of the trade deficit and point to Chinese
restrictions on U.S. imports, such as wheat, cotton, meat, and
soybeans. These imports are currently restricted on
questionable sanitary-phytosanitary grounds that are
inconsistent with WTO standards.
The Embassy noted that it is extremely difficult for U.S.
companies to do business in China due to the bureaucracy.
Nonetheless, a core group of companies--e.g., IBM, Coca-Cola,
General Electric, John Deere, Proctor & Gamble, Motorola--is
doing well in China. The Chinese also have a high degree of
confidence in U.S. insurance and service companies, although
access to the market is still restricted.
As for Chinese WTO accession, the Chinese made some
positive gestures at the last working party meeting in Geneva.
These included a standstill commitment on new restrictive
measures and some national treatment commitments. Nonetheless,
successfully concluding a protocol of accession for China will
be difficult--partly due to the huge number of nontariff
measures still in place in China, and partly due to timing.
Specifically, while the United States is coming out of a
political election cycle, the Chinese are just entering one, to
culminate in the selection of a successor to Premier Li Peng in
October. Moreover, the reversion of Hong Kong to China in July
1997 will divert the attention of the Chinese leadership from
matters such as WTO accession in the coming months.
In a discussion later the same day, the Embassy briefed
the delegation on the issues expected to arise during meetings
with Chinese leaders. Embassy officials described the recent
decision of Eximbank not to finance the Three Gorges dam
project. The administration's concerns over the project include
the huge number of people that would have to be relocated most
likely to already overcrowded cities and the flooding of
cultural sights. Because Eximbank did not approve the project,
it will be difficult to obtain private funding.
Meeting With MOFTEC Vice Minister Sun Zhenyu
December 13, 1996
Vice Minister Sun began by noting that the recent meeting
between President Jiang Zemin and President Clinton signaled
improved relations between the two countries. He noted that
China had sent a delegation to the WTO Ministerial Meeting in
Singapore and hopes to gain membership in the WTO in the near
future. China, he said, is determined to achieve this goal as a
way to demonstrate that it is a responsible member of the
international community. He believes there will be a cost to
China if membership is delayed. Although China is prepared to
fully observe all WTO rules over a period of time, the United
States should appreciate that this represents an arduous task
for China.
Many factories in China operate inefficiently and will not
be able to meet the tough competition of additional imports.
Chinese leaders are worried that the stability of Chinese
society will be threatened because China does not have fully
functioning social security programs to protect the poor. In
this vein, China has made difficult political decisions in
order to pursue WTO membership. These difficult decisions
indicate China's resolve to continue the process of reforming
of its economic system.
Vice Minister Sun welcomed U.S. support for China's early
accession to the WTO. Chairman Crane cautioned that WTO
membership for China has its detractors as well as proponents
in the United States and that it will take time to achieve a
bipartisan consensus in support of this effort. He observed
that joining the WTO will result in significant economic
benefits for the Chinese people because of the economic
liberalization required by the WTO.
Observing that the rest of the world hopes that the United
States and China will resolve their differences for the sake of
peace as well as prosperity, Ranking Member Rangel acknowledged
that there are people in both countries who believe they will
be adversely affected by increased trade. For example, it is
difficult to explain to U.S. workers why China needs special
protections when she is exporting so much more to the United
States than U.S. companies export to China. U.S. workers fail
to understand why U.S. wheat and citrus are denied entry to
China on phytosanitary grounds, and why industries producing
movies, computer software and sound recordings are facing trade
barriers in China. A political reality for elected officials in
the United States, said Congressman Rangel, is that it does not
appear to U.S. workers that their products are being treated
fairly in the Chinese market.
With respect to the size of the trade deficit that the
United States has with China, Minister Sun noted that there is
a large discrepancy between U.S. statistics ($34 billion) and
Chinese statistics ($8.6 billion.) In China's view, much of the
disparity can be accounted for by the fact that a large
percentage of China's exports (about 56 percent) to the United
States are managed by in-bond processing companies which supply
raw materials to China and ship final products through Hong
Kong and other countries. Many of these companies are U.S.
owned and have very large markup ratios. Under the U.S.
accounting system, the entire value of these goods produced by
companies such as Mattel and Nike are counted as China's
exports to the United States.
Minister Sun maintained that several U.S. policies
contribute directly to the size of the bilateral trade deficit:
(1) lack of Eximbank financing for the $10 billion Three Gorges
Dam project; (2) prohibitions against U.S. companies
participating in nuclear cooperation projects and; (3)
restrictions on U.S. companies supplying technology for the
installation of a weather computer. He said that China enjoys a
comparative advantage in products such as toys and consumer
electronics, which are supplied to U.S. consumers at attractive
prices. The U.S advantage lies in the production of high-tech
products, the sales of which are often limited by U.S. policies
restricting exports.
With respect to restrictions on U.S. wheat exports to
China, Minister Sun explained that China cannot import from TCK
infested areas because contamination of China's wheat
production with TCK smut spores would be disastrous for China
as it often faces life-threatening food shortages. He views
this as a scientific issue affecting national sovereignty
rather than strictly a trade issue. On the subject of
protection of intellectual property, he reviewed China's
enforcement efforts, including the detention of $10 million of
pirated goods.
Minister Sun complained that the annual debate over
China's MFN status puts the U.S.-China trade relationship in an
uncertain atmosphere, leading people to think that MFN might be
revoked. He applauded passage by the U.S. Senate of legislation
to change the terminology of MFN to Standard Trade Relations,
or STR.
Senator Grassley thanked China for being a growing
purchaser of U.S. products. He believes that the world's future
depends on economic giants such as the United States, the
European Union, and China resolving their differences. Saying
that trade is a two-way street, he emphasized that the United
States needs income from selling goods to China in order to buy
Chinese products. Tremendous trade deficits with one country
are usually indicative of underlying structural problems, he
said, and are inherently unsustainable as a political matter.
Senator Grassley went on to urge Minister Sun to consider
the importance of U.S. agricultural imports to food security
for the Chinese people. With the continued occurrence of
droughts, China cannot depend on being self-sufficient in food
production and thus needs U.S. supplies. He asked Vice Minister
Sun to take another look at establishing more practical
standards for imports of U.S. wheat, recognizing that it is
impossible for U.S. exporters to certify zero levels of TCK
spores. The Senator underscored the achievement of the WTO
Agreements on Sanitary and Phytosanitary measures, which
established common principles for setting standards ``that gets
politicians and bureaucrats out of making these decisions.''
Congresswoman Dunn raised the subject of increasing
aircraft sales to China, an issue important to her district,
which is home to many employees of Boeing Corp. Congresswoman
Thurman spoke in favor of opening the Chinese market to exports
of U.S. citrus products through approval of U.S. inspection
facilities, an issue which is currently under discussion.
Speaking as a member of the delegation who voted against
extending MFN to China, Congressman Collins pointed to the
bilateral trade deficit. He emphasized that his constituents
see Chinese products filling U.S. shops, replacing products
which used to be made by textile mills in Georgia which no
longer exist. Until China buys more products from U.S. workers
and firms, he stated firmly that he will not change his mind
about MFN.
Meeting With American Chamber of Commerce, Beijing
December 13, 1996
The CODEL held a luncheon meeting with the American
Chamber of Commerce of Beijing (ACCB) on December 13, 1996. Jim
McGregor of Dow Jones, who is currently President of the ACCB,
led off the discussion by noting that the U.S.-China
relationship has historically had its ups and downs and is now
in an upward phase. There are now 520 million Chinese who are
24 years old or younger; all they have known is the constant
economic reform that has characterized China in recent years.
While the Chinese people are generally predisposed in favor of
the United States, they resent the volley of criticism they
receive from the Congress during the annual MFN renewal
debates. China receives $120 million per day in new foreign
direct investment and is changing for the better every day
through peaceful evolution. Mr. McGregor asked for patience and
foresight from Members of Congress in dealing with China.
Regarding WTO accession, the business community supports such
accession by China on commercially viable terms. By that, they
mean the ability of foreign businesses in China to do business
on a national treatment basis. Negotiations on Chinese WTO
accession would be difficult, however, in part because Chinese
state industry still employs 110 million people and accounts
for 45 percent of output.
Chairman Crane, Ranking Democrat Rangel, and Senator
Grassley all made initial remarks to the gathering, describing
the purpose of the CODEL and reporting on the CODEL's meetings
in Singapore. They all stressed the bipartisan nature of U.S.
trade policy and the fact that trade contributes to world
peace. Congressman Rangel noted that, while the annual MFN
debate is not appreciated by the Chinese, it does provide a
regular opportunity for the U.S. Congress to debate U.S.-China
relations before the public. In response, Jim McGregor again
suggested that the annual MFN debate is counterproductive
because the Chinese people do not like to be criticized
unfairly. A better Congressional debate, he said, would be over
how to achieve democracy in China. The annual MFN debate also
erodes the U.S. business position in China by hurting sales. At
the same time, he acknowledged that, regardless of the MFN
debate, doing business with the Chinese can be frustrating.
Specifically, foreign companies are required to follow a higher
standard than Chinese companies. Morever, China is basically a
mercantilist nation when it comes to trade--``they export like
capitalists and import like communists.'' Mr. McGregor pointed
out that, while the Chinese are great negotiators, the United
States buys one-third of their exports. Consequently, U.S.
trade negotiators should insist that China provide reciprocal
market access.
Jaime Horsley of Motorola commented on the ACC-Beijing
position on Chinese WTO accession. She emphasized that China
should be allowed into the WTO, but only on commercially viable
terms. As a major trading nation, China should act like a
developed country in the WTO and fully assume WTO obligations
on MFN, national treatment, transparency, and trading rights.
A representative of Cigna Insurance described financial
services as essentially off limits to foreigners in China,
primarily because the Chinese Government fears the Chinese
financial system will be overwhelmed by foreign competition if
foreign companies are allowed into the market. The challenge is
to persuade the Chinese that opening up the domestic market to
foreign participation is a win-win situation and that profits
made by foreign companies will not all be repatriated.
A Westinghouse representative said that China is a country
of opportunity, particularly for electric power projects. These
projects take 2-3 years for U.S. companies to put together with
the Chinese and require U.S. Government and Export-Import Bank
assistance to succeed. He lamented, however, that MFN
uncertainties continue to make all his potential deals with
China problematic. John McAlister concluded by urging the CODEL
to work on their colleagues in Congress on funding for a new
U.S. Embassy complex in Beijing. He said that the current
facilities are a disgrace, disrespectful of the Chinese, and
symbolic of a declining power. They are major impediments to
U.S. companies doing business successfully in China. These
remarks were widely applauded by the U.S. businessmen at the
luncheon.
Meeting With State Planning Commission Vice Chairman Gan Ziyu
December 13, 1996
Chairman Crane opened the meeting by noting that he was
interested in the progress that China has made toward economic
reform. He stated that obtaining permanent MFN status this year
is not realistic because of the timing of Hong Kong's reversion
to Chinese control. However, he emphasized that he looks
forward to Chinese accession to the WTO in a commercially
viable manner, with all compliance standards and transition
periods spelled out in advance.
Vice Chairman Gan began by describing the State Planning
Commission (SPC) as a coordinating body under the State
Council. He discussed its functions as formulating short- and
long-term plans, replete with strategic targets, coordinating
with other ministries regarding how to best achieve
macroeconomic objectives within a market economy, and
identifying and putting in motion major projects, including
those involving joint ventures with foreign investors.
In describing China's economic development, Gan said there
have been major successes as well as failures since the
founding of the PRC 40 years ago. In the 1950s, per capita GDP
was less than $50 a year. While still very low today, a joint
World Bank-Chinese study in 1985 found that GDP per capita had
risen to about $250. In the 17 years since China began its
economic reforms, GDP has risen steadily, as a result of annual
GDP growth which has averaged 10 percent annually. Moreover,
the number of people at or below the poverty line dropped from
120 million in the 1980s to 65 million 1996, with the majority
located in rural areas. Gan acknowledged that the figure may
well be higher than that, citing the recent World Bank study
which put those Chinese in poverty at 400 million.
Raising 65 million people out of poverty and improving
productivity are the objectives of the ninth 5-year plan. By
the year 2000, GDP per capita is supposed to be four times what
it was in 1980 (i.e., over $1000), and GDP itself is supposed
to be four times the amount of 1980. This will require annual
GDP growth rates of 8 or 9 percent per year. Vice Chairman Gan
forecast annual growth rates of 7 percent for the decade
beginning in the year 2000.
Another objective of the new 5-year plan is to make the
economic system market driven by the year 2010. At present, Gan
maintained, market forces govern 85 percent of agriculture
output, 95 percent of consumption goods, and 90 percent of
capital goods. In addition, the SPC is carrying out tax,
banking, currency and foreign investment reforms. Economic
reforms, Gan noted, need to take place in a stable economic
environment that remains attractive to foreign investment and
supports continued repayment of loans from international
financial institutions, which now exceed $150 billion.
With regard to China's performance in international trade,
Gan estimated that China's total trade volume (exports and
imports) would be $290 billion this year, with a trade surplus
of about $16 billion. He forecast that total trade volume would
be close to $400 billion by the year 2000. Bilateral trade with
the United States is fourteen times what it was in 1979, the
year diplomatic relations were normalized.
As for the WTO, Gan said that China and the WTO ``were on
a convergence course'' and cited as evidence China's recent
reduction of 4,900 tariff line items, the cancellation of
certain regulations and taxes for imported commodities, and the
establishment of more transparent trade rules. Gan said that,
as a developing country, China should not be asked to meet the
``high demands'' of other countries. Its economic system is
still in transition, and it cannot step up the timetable for
the sectoral changes that have to be made. Nor would such
unacceptably high standards be beneficial to trade and
investment relations, as they could result in destabilization
of Chinese society. Gan said his goal is to make the capital
account and the current account fully convertible after the
year 2000, but to do this any sooner could potentially lead to
economic chaos.
Following Gan's presentation, Senator Grassley noted that
it was far easier for China to trade with the United States
than with any other country in the world, and yet China does
not seem very open to U.S. products. To strengthen the overall
relationship, Senator Grassley suggested that China open its
market to U.S. products.
Gan repeated the argument made by Vice Minister Sun that
the size of the bilateral trade deficit is overstated by U.S.
figures. He said that a large number of Chinese exports to the
United States go through Hong Kong, and that these were beyond
China's control. For example, if China imports raw materials
valued at $50 billion and exports products worth $55 billion to
the United States, the Chinese realize only $5 billion in
processing. He noted that many U.S. companies manufacture
products in China, the prices of which are marked up
significantly when they are sold in the United States.
Meeting With Vice Premier Zhu Rongji, Member Standing Committee,
Politburo and Vice Premier
December 13, 1996
The delegation's last meeting in China was with Zhu
Rongji, Member of the Politburo Standing Committee and Vice
Premier in charge of the economy.
Discussing the bilateral trade deficit, Zhu recited the
familiar argument that the size of the deficit was not nearly
as large as U.S. figures suggest. Hong Kong transhipments are
charged to China regardless of where these goods originate, he
said. He estimated that 60 percent of total exports from China
come from U.S., Japanese, European and Taiwanese firms that
have invested in China. They import raw materials and process
them in China. But these enterprises have their own strategies
and China cannot control them. All China gains from them is
minimal employment opportunities, generally offering low wages.
Zhu emphasized that the way to improve the bilateral deficit is
for China to import more from the United States, and China is
committed to doing just that, he said.
On the subject of wheat imports, Zhu noted that China was
very concerned about the introduction of TCK smut spores--which
he said had been found in shipments from the United States into
Chinese wheat growing regions. To deal with the problem, China
has proposed that Chinese agriculture inspectors go to the
United States to preinspect wheat to be exported to China. The
proposal is still under discussion, and China, he said, will
import U.S. wheat as soon as these quarantine issues are
settled through negotiations.
In response to an inquiry by Congresswoman Thurman
regarding the prospects for selling U.S. citrus products in
China, Zhu said that quarantine concerns need to be discussed
here too, but that he was ``confident of an eventual settlement
of outstanding problems.''
Chairman Crane made the point that the United States takes
a much larger percentage of China's exports than does any of
China's other trading partners, including Japan and Europe. He
urged Zhu to focus on expanding opportunities for U.S.
exporters by increasing market access and eliminating trade
barriers. In response, Zhu said there has been a rapid increase
in Sino-U.S. trade, with Chinese companies favoring American
products over Japanese, since U.S. firms generally share more
attractive technology.
Congressman Collins next discussed the importance of
successfully concluding negotiations to renew the bilateral
textile agreement, which expires on December 31, 1996. He
called on China to address the textile transshipment problem
and to provide U.S. textile producers greater access to the
Chinese market. The Vice Premier reaffirmed China's intention
buy more from the United States, saying that he saw ``no big
problem'' with achieving market access in China for U.S.
textile products. Higher value U.S. products should find an
increased market in China, given the growing purchasing power
of reasonably well-off Chinese. In the past, Zhu said, China
was constrained with regard to the amount of textiles that
could be imported. However, now that foreign exchange reserves
have risen to $102 billion, China could generally increase its
imports of most general consumption goods.
The issue of China's WTO accession, Zhu said, has been
discussed for such a long period of time that his once black
hair has now turned grey and the organization is now no longer
called GATT. ``There is a ray of light'' now, however, he said,
because ``there are increasing pieces of news coming from the
United States, that Americans are more willing than before to
negotiate.'' China hopes this issue, which depends chiefly on
the American attitude, will be settled quickly.
Zhu believes the key matters to be resolved are the
obligations that China will agree to shoulder and the
transition periods that will be permitted for China. China
simply cannot take on all the responsibilities of a developed
country, maintained Zhu, pointing to the fact that Sir Leon
Brittan of the EU had discussed this with MOFTEC Minister Wu Yi
during his visit last month, and had agreed with her on the
importance of transition periods and phase-ins of obligations.
In response, Chairman Crane recognized that the question
was one of transitions before China assumes all WTO
obligations. As one of the biggest economic powers on the face
of the earth, he said, China will have to agree to specific
deadlines. Congressman Collins emphasized that it is time for
China to put these transitions periods down in detail. ``Let us
know what you want and what you need to become a full partner
in the international trading system,'' he urged. Avoid
speculative discussion, he said, and focus on the plan and
timetable that is needed to get China in the WTO.
Zhu took the view that the timing on some economic reforms
is still unpredictable. One timetable was for China to cut its
tariffs to an average rate of 15 percent by the year 2000, a
figure that it had agreed to at the APEC meeting in Osaka in
1995. This would be in line with the average tariff rate in the
developing world. Zhu stated that it was hard to predict when
China could reduce tariffs below 15 percent, though his
personal opinion was that this might be possible ``within the
20th century.'' Later in the meeting he clarified that he did
not mean to suggest that all tariffs across the board would be
reduced to 15 percent or below. He cited the auto sector as one
sector which would likely retain higher tariff levels. Finally,
he noted that it was likely that General Motors would be a
major player in the auto sector once its Shanghai joint venture
started production, so, in this regard the United States should
consider China to be an open market for American automobiles.
APPENDIX A
APPENDIX B