[Congressional Record Volume 142, Number 96 (Wednesday, June 26, 1996)]
[Senate]
[Pages S6947-S6949]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         WISDOM OF RENEWING MFN

  Mr. GORTON. Madam President, tomorrow the House of Representatives 
will debate the renewal of most-favored-nation trading status for 
China. It is about to vote, as the President wishes, in favor of 
renewing MFN.
  Knowing that MFN was to be at issue this summer, earlier in the 
spring I wrote to nearly 350 of my constituents, mostly business people 
and academics particularly interested in trade with China. In my 
letter, I explained my frustration with China's consistently autarkic 
market practices, and told them that I had serious concerns about the 
wisdom of renewing MFN for China. China has established an egregious 
prohibition on Washington State wheat, while market access for our 
applies has been blocked by arbitrary quotas and tariffs. Moreover, 
China continues to bleed our software industry with its state-sponsored 
pirating of United States intellectual property. With this in mind, I 
asked my constituents to share their views with me, and I now believe 
it appropriate to share my own with my colleagues and constituents, as 
it seems unlikely that this issue will come formally before the Senate.
  To the 341 letters I sent, I received 195 responses, and of those 
responses 12 were against renewal.
  From Pacific Northwest wheat growers, who are denied access to the 
Chinese market on totally specious grounds, I heard this: ``Despite the 
fact that Washington producers are still unable to participate in the 
wheat export to China, [we] are in full support of granting China MFN 
for another year.''
  From Washington State's apple, pear, and cherry growers, who face 
tremendously unfair barriers in gaining access to Chinese markets: ``We 
are in an industry that lives on exports . . . this business requires 
as normal a trading regime as possible between our country and 
potential markets.''
  From the software industry, which continues to hemorrhage because of 
Chinese piracy: ``The flagrant violation of U.S. intellectual property 
rights is of primary concern to [us] . . . we are concerned [however] 
that failure to renew MFN at this time will constitute too big a blow 
to the remaining threads of the U.S. relationship with China.''
  The Boeing Company certainly benefits from trade with China, as 
well--it predicts that Asia will be the largest market for airplanes in 
the next 50 years. In Washington State, Boeing has close to 300 
subcontractors that provide it with goods and services. And those small 
companies, like Bumstead Manufacturing in Auburn, Stoddard-Hamilton in 
Arlington, and Dowty Aerospace in Yakima, all depend on Boeing selling 
its airplanes for their own well-being.
  Even the Port of Longview has an interest in American trading with 
China. Archer-Daniels Midland Corporation intends to build a state-of-
the-art facility for the export of Midwest corn to Pacific rim markets 
in that community. China certainly figures into that equation.
  Madam President, many of the people who wrote to me believe that 
engaging in trade with China will lead to better trade and economic 
conditions in both China and America. One person argued that:

       Maintaining a healthy trade partnership with China will 
     ensure that our influence in areas such as human rights and 
     fair trade practices survives; curtailing that partnership as 
     a punitive measure will only lead China to lose the incentive 
     to cooperate.

  It is certainly clear, that--at least in the short-term--American 
companies that trade with China would be hurt if MFN were not renewed. 
My constituents, in their letters, made that point eloquently.
  Because of my deep respect for these constituents, I would vote to 
extend MFN this year if the Senate were to vote on the subject, and I 
commend such a vote to my Washington State colleagues in the House.
  But, Madam President, in casting that affirmative vote I would be 
wrong. I do acknowledge the importance of trade with China to the 
people of my State, but I want to explain why the President is wrong, 
and why I would be wrong, as well, to support him.
  I would be wrong because the chances of China changing its dismal 
trading practices, or stopping its violations of United States 
intellectual property rights, or acceding to a freer, more open market 
as a result of MFN renewal are about as close to zero as you can get.
  China is an unrepentant free trade rejectionist. China is one of the 
world's most corrupt nations. China steals our software and CD's. China 
arbitrarily closes its market to United States goods. And China, aside 
from eleventh-hour propaganda tricks, does nothing to clean up its act. 
For years the United States has pinned its hopes for a more 
cooperative, law-abiding China on MFN. MFN advocates talk about 
``engagement.'' If we only ``engage'' in trade with China, they argue, 
the Chinese will change their ways, they will come around to the idea 
of free trade and open markets and all that goes with them.
  Many of my colleagues here in the Senate, Madam President, have been 
making the engagement argument for years. Back in July of 1991, for 
example, my distinguished friend from Rhode Island, Senator Chafee, 
said that ``we want China to move toward the implementation of a 
market-based economy,'' implying that MFN was the way to do it. Senator 
Chafee also argued that ``[t]o withdraw MNF would virtually destroy * * 
* business leaders and entrepreneurs [in the more economically 
liberalized southern part of China. * * * They will go down the drain 
because they will not have access to the U.S. markets to sell their 
goods.''
  My friend from Montana, Senator Baucus, said, also in 1991, that:

       Rather than isolating China from the world by cutting off 
     economic ties, we should seek to engage China--to bring China 
     into the 20th century.
       Trade is the link that allows us to engage China. It is the 
     bridge that allows western values into China.
       If we are truly interested in reform in China, if we are 
     truly interested in improving the lives of Chinese citizens--
     we should seek to expand economic ties, not to cut them off.

  These words sound persuasive, do they not, Madam President? But keep 
in mind they were uttered 5 years ago. Five years ago our trade deficit 
with China was a little under $13 billion. Now it is almost $34 
billion. We have been engaged with China that whole time, and where has 
it gotten us? Another $20 billion in the hole. Will we never learn? Are 
we destined forever to demonstrate the triumph of hope over experience? 
What has the engagement of the past 5 years accomplished to cause us to 
parrot today the very arguments that have so signally failed in the 
past?
  This engagement argument, Madam President, can be refuted by a 
cursory glance at China's wretched record on trade with America. 
Indeed, our trade relationship with China totally belies the assertions 
of those who consider MFN a tool for making China more cooperative.
  Madam President, over the years, especially in the years since 
Tiananmen Square and the fall of the Soviet Union, many issues besides 
trade have been injected into the MFN debate. Human rights, nuclear 
proliferation and relations with Taiwan are three of the most prominent 
of those issues. I have chosen to stick solely to the matter of trade, 
but I do understand that these other concerns are at the front of many 
people's minds.
  I say this, Madam President, by way of addressing what I consider to 
be a glaring error in the arguments of many MFN advocates. They argue, 
rightly, that the MFN debate is not the place for a discussion on 
China's human rights record or its practice of selling nuclear 
components to countries unfriendly to America. I agree with that 
argument. The Chinese Government gets an ``F'' on how it treats its 
citizens, and it should be severely dealt with for its shameless sales 
of nuclear technology to the villains of the world. But MFN is trade 
policy, and we should stick to trade in our arguments on its extension, 
be they pro or con.
  That is all well and good, Madam President, but I am struck by how 
often MFN advocates violate their own ground rules. In an attempt to 
make MFN renewal more savory, the spice up their arguments with the 
theory that trade with China will bring democracy to China. If we keep 
renewing MFN, the argument goes, we will help usher in an era of 
freedom and democracy to

[[Page S6948]]

that country. That is one of the most far-fetched claims I have ever 
heard, and the people who are making it need to submit themselves to a 
reality check. Considering our current circumstances--the trade 
deficit, Chinese piracy and trade barriers, and all the rest--it is 
hard for me to believe that America is now in a position to coax China 
into the ways of democracy. We cannot get the Chinese to take our 
apples, Madam President, so how can we expect them to embrace our 
political values?
  In other words, Madam President, let us, for the purpose of this 
debate, leave aside the question of trade as a precursor to democracy. 
We have enough on our hands just dealing with trade by itself. And I 
think the debate over whether MFN renewal is or is not in our long-term 
trade interests should be sufficient to occupy this body.
  Let us look at the current trade situation. China, using a completely 
fraudulent rationale, bans all wheat from the Pacific Northwest, and 
bans practically all Washington State apples. Cherries and other fruits 
are not even given a chance. Mainly as a result of Chinese trade 
barriers to American goods, we have a $33 billion bilateral trade 
deficit with China. The Chinese Government countenances widespread 
piracy of American intellectual property, costing United States 
companies over $2 billion a year. China, in short, flouts international 
trade norms and mocks the basic principles of free trade.
  Now, proponents of MFN will say,

       Yes, things could be better, but the only way to make sure 
     things improve is to maintain trade ties with China. By 
     remaining economically engaged, we can pressure the Chinese 
     to change their ways. If we cut off MFN to China, not only do 
     we lose that market, but we forgo our leverage with the 
     Chinese as well.

  Madam President, I believe that I have already demonstrated that 
those who have latched onto MFN as some sort of magical instrument with 
which we can solve all problems are mistaken. They have not only 
overstated the importance of MFN, but of the Chinese market as well.
  Madam President, when I listen to the arguments of those who favor 
renewing MFN for China I am struck by a common denominator, as it were, 
and that is a universal overestimation, an exaggeration, of China's 
economic importance to our national economy. MFN advocates would have 
us believe that without China our economy will be devastated. Let me 
say, that is not the case.
  China is our 13th largest trading partner. Our trade with China 
accounts for less than 1 percent of our gross domestic product--0.81 
percent, to be exact, hardly an earth-shattering figure. And Mr. Marcus 
Noland of the Institute for International Economics said in a recent 
Washington Post article that ``Chinese imports are mostly displacing 
imports from Mexico, [South] Korea, [and] Taiwan.'' In other words, 
most of the things we import from China we could just as easily import 
from these other nations. Nations, in the case of Mexico, South Korea, 
and Taiwan, that are friends and allies, with whom we have good, strong 
trade agreements. Each of these friends is a better and more open 
customer than China, by far, whose purchases of our goods and services 
will promptly match our increased purchases from them. And with our 
neighbor Mexico, for example, we know that its market is fully open to 
American goods--no hassles. What a contrast with China.
  The trade story is quite different from the Chinese perspective. 
China needs the United States badly. China's trade with America 
accounts for well over 8 percent of its gross domestic product. While 
we export less than $12 billion to China, China exports $45.5 billion 
to us. The United States makes up nearly a third of China's total 
export market.
  Now why, taking these lopsided facts into account, would China risk 
its own financial and economic well-being by thumbing its nose at 
America as it does? Only because we allow China to do so. Our 
solicitous, all-forgiving policy toward China can be summed up in one 
word: Appeasement.
  How well our policy of appeasement--which its apologists call 
``engagement''--how well this policy is working can be demonstrated by 
the fact that we had a standoff with China a year-and-a-half ago on, 
guess what, intellectual property rights violations. And, guess what, 
at that time China promised to mend its errant ways. It committed to 
ending its piracy of American goods. Now, less than 2 years later, we 
are at it again. There is a song, Madam President, called ``Stop Me if 
You Think You've Heard this One Before.'' That ought to be the theme 
for these trade negotiations. We have indeed heard from the Chinese 
before that they would clean up their act, stop the violations, and 
play by the rules.
  I direct my colleagues' attention to a recent article on Chinese 
piracy in Business Week magazine. The article's title says it all: ``A 
Pirate Under Every Rock.'' Madam President, I will read a short excerpt 
to illustrate just how meaningless last year's agreement was:

       When China signed its Intellectual Property Rights accord 
     with the U.S. last year, Beijing promised that it would 
     assign inspectors to each Compact Disc plant. The government 
     also promised that plants would print a code on their 
     products to identify where they were produced. But during a 
     raid on the Jin Die [Science & Technology Development Company 
     in the south] organized by Chinese authorities and Microsoft 
     Corp. in April, no copyright monitors were on duty. No 
     special codes were on the goods. Workers labored around the 
     clock, producing CD-ROMs from three unauthorized presses. The 
     plant has an estimated 100 employees and the capacity to 
     stamp an astounding 200,000 CDs a day. Beijing announced in 
     early June that it might close Jin Die.
  The PRESIDING OFFICER. The Senator's time has expired.
  Mr. GORTON. Madam President, I ask for an extra 4 or 5 minutes.
  The PRESIDING OFFICER. Is there any objection?
  Mr. EXON. What is the request?
  Mr. GORTON. Four more minutes.
  Mr. EXON. I say, Madam President, there are people we have lined up 
waiting. I thought I yielded 10 minutes. I thought that would suffice.
  How much more time?
  Mr. GORTON. It looks about 4.
  Mr. EXON. I will agree to 2 additional minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GORTON. That shows you, Madam President, how good China's word 
is, and how much we can expect from these trade agreements. The Chinese 
are now putting on a show of contribution for all the world to see. Its 
state-run television has shown tapes of bulldozers rolling over pirated 
CDs, and the government has announced with great fanfare that it is 
shocked by the piracy and is closing down dozens of counterfeiting 
factories. Madam President, give me a break.
  That is all for show, and anyone who thinks it is a serious effort 
that will bring substantive results is kidding himself. Last week's 
ballyhooed agreement is unlikely to be more than marginally more 
effective than the last one.
  In fact, Business Week also writes that ``Chinese production capacity 
[for counterfeit CDs] this year will be about 200 million CDs, up from 
about 50 million last year.'' That agreement last year really did the 
trick, didn't it, Madam President? China has increased its counterfeit 
operations to four times last year's level.
  Here is another important point, Madam President: A recent study, 
which was reported in the Washington Post and elsewhere, named China as 
one of the top five most corrupt countries in the world. And Business 
Week reports that ``[m]any CD plants'' in southern China '`have local 
backers such as units of the Public Security Bureau and the People's 
Liberation Army.''
  Madam President, what we have here is a deeply corrupt country that 
either has no respect for, or simply cannot maintain, the rule of law.
  So, knowing all of what we know about China--its corruption, 
its unrepentant thievery, its consistent trade violation--why on earth 
do we continue to coddle it? I think, Madam President, we do so because 
our attitude toward China is still steeped in a cold war mentality. 
During the cold war we placed great importance on China as a 
counterbalance to the Soviet threat. Now that the cold war is over, 
however, we have not re-assessed China's strategic importance. One 
could make a strong case for China's strategic importance when America 
strove to contain, and then roll back, the Soviet Union's influence and 
aggression. But today, China enthusiasts--and most MFN advocates--are

[[Page S6949]]

caught in a bit of a time warp. They say that China is of the utmost 
importance because--because--well, they cannot say because of the 
Soviet Union because it's gone. So they simply insert the word 
``trade'' where ``Russia'' used to be and make the argument as best 
they can.

  Madam President, that won't do for a trade policy. It is short-
sighted, risky, and just plain dumb to ignore massive trade violations 
such as those practiced by China. We cannot go on like this forever, 
Mr. President, with China stealing more and more of our intellectual 
property rights, throwing up barriers to our goods and causing our 
trade deficit to go ever higher.
  I hope I'm wrong. I hope that by this time next year an enlightened 
China will be operating in a free trade atmosphere under the rule of 
law, welcoming our goods and services as we do its. If so, I will be an 
enthusiastic supporter of renewal. But I don't believe it for a New 
York minute.
  On the other hand, Madam President, let me say that if China has not 
reversed herself on these trade violations by next year, I will vote 
against MFN renewal. I hope my critics prove me wrong, but if not I 
will personally lead the fight on the Senate floor against it.
  You do not encourage free trade by allowing violations of free trade. 
If, in fact, free trade--and not appeasement--with China is our goal, 
then we must let the Chinese know that they must play by the rules or 
face penalties. That is what we demand of our other trading partners, 
and that is what we should demand of China.
  Mr. President, I am not at all insensitive to the exhortations of 
American companies who stand to lose money and contracts in the short 
term if MFN is not renewed. I take that very seriously, and I hope that 
we may have a strong, vibrant trade relationship with China--but that 
is possible only if China ceases its destructive practices. Now, Madam 
President, representing, as I do, a very trade-dependent State, it 
would seem the easiest thing in the world for me to go ahead and 
express my full support for MFN without reservation. There are 
certainly a lot of people who would like me better if I did. But the 
easiest things are not always the best, and I consider it my highest 
duty to think ahead to the best interests of my State and the country. 
And I do not think it in our best interests to continue in our current 
policy.
  If we don't take a firm stand with China, and if China does not cease 
and desist, I fear that our relationship will degenerate into one in 
which we are the constant appeaser and China is the constant violator. 
In the long run, our current passivity could come back to haunt us.
  A constituent and a good friend of mine has made this point 
eloquently. He is involved in several investment efforts in China and 
writes:

       I believe that . . . the United States will have to take 
     the lead for the rest of the free trading world and stand up 
     to China's rapacious trading behavior by denying MFN 
     extension. I recognize that taking this position is not in my 
     own short term interest. Nevertheless, I can't let immediate 
     short term interest stand in the way of that which is right 
     and that which I believe will, over the longer term, provide 
     a superior result.

  Madam President, I couldn't put it any better. For all we know, China 
may soon step up its illegal practices and trade violations to 
encompass not just intellectual property rights and agricultural 
products, but planes and other American products as well. We are 
setting a bad, potentially dangerous, pattern. We must stop it soon, or 
we may soon regret it.

                          ____________________