[Congressional Record Volume 145, Number 64 (Wednesday, May 5, 1999)]
[Senate]
[Pages S4734-S4735]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         CHINA'S WTO ACCESSION

  Mr. BAUCUS. Mr. President, I rise this morning to offer some thoughts 
on the negotiations towards China's WTO accession, in the aftermath of 
Premier Zhu Rongji's visit to the United States.
  This, I submit, is a question of fundamental importance to America's 
trade interests. China is now our fourth largest trading partner--after 
Canada, Japan, and Mexico--a major market, and the source of our most 
unbalanced trade relationship in the world. And it is perhaps still 
more important to America's strategic interests in Asia. Today, I would 
like to review the progress thus far and its implications for these 
interests.
  Let me begin, however, with some context about WTO accessions and the 
commitments they require.
  The WTO really began with the creation of the General Agreement on 
Tariffs and Trade, otherwise known as the GATT, in 1948. At that time, 
23 nations were members. Each of them agreed to a set of tariff cuts 
and agreed to apply the new tariffs to all other GATT members. This is 
the famous, or infamous, principle of ``MFN,'' or ``Most Favored 
Nation.''
  Since then, since 1948, 111 other economies--membership is no longer 
restricted to countries, as Hong Kong and the European Union are now 
members--have joined to make up today's 134-member WTO.
  The original tariff agreements are also joined by agreements on 
sanitary and phytosanitary standards--that is, health standards--
intellectual property, technical barriers to trade, and other issues. 
And 30 more economies have applied to join, the largest being China.
  As these economies join, they must also lower their trade barriers, 
live up to WTO's intellectual property and agricultural inspection 
commitments, and so forth. For existing members, however, the only 
requirement is the one they adopted back in 1948: that we apply MFN--or 
today normal trade relations--tariffs to the new members. That is the 
only commitment that current members have to make.
  So as we consider the commitments China has and will make to be a WTO 
member, we must also remember that these are fundamentally one-way 
concessions. Let me repeat, to enter the WTO, China has committed to a 
set of one-way concessions.
  Nothing in any WTO accession will mean American concessions on market 
access; the use of our trade laws to address dumping, subsidies, or 
import surges; or controls on American technology exports. Likewise, if 
we should choose to tighten export controls at some point in the 
future, nothing in the WTO accession would prevent us from doing so.
  Let me now turn to the commitments China has made and to the issues 
which remain.
  To enter the WTO, China and the existing members must do two things: 
draft a ``Protocol'' covering a set of fair trade policies, and agree 
on a set of market access concessions.
  These are the issues which the American negotiating team addressed in 
the months and weeks before Premier Zhu's visit. And the results are 
striking. China has made a significant set of concessions in both 
areas. The work is not done, but let me review for the Senate some of 
the major elements.

  Under the protocol, China has made the following commitments: It will 
end the practice of requiring technology transfer as a condition for 
investment. That is very big. This includes refusing to enforce tech 
transfer provisions of existing contracts. The United States is 
guaranteed the right to continue using nonmarket economy methods for 
fighting dumping and unfair subsidies.
  China will end investment practices intended to take jobs from other 
countries, for example, local content requirements which stop auto 
plants from importing U.S. parts; export performance clauses requiring 
production to be exported rather than sold on the Chinese market, and 
so on. And China has agreed to a product-specific safeguard which will 
strengthen our ability to fight sudden import surges.
  It is important in the weeks and months ahead to ensure that these 
provisions have acceptable duration. But it is also clear both that we 
will be able to use the WTO to strengthen our guarantees of fair trade, 
and also that we will be able to use our own domestic trade laws for 
the same purpose. These are fundamental parts of any successful WTO 
accession.
  The American negotiators have also won an impressive set of 
commitments in market access. Let me offer a few examples: In 
agriculture, China has already begun by lifting its infamous ban on 
Pacific Northwest wheat, American beef, and also on citrus products. 
And when it enters the WTO, it will accompany this by major tariff 
cuts. For example, beef tariffs will fall from 45 percent to 12 
percent, and adoption of tariff-rate quotas in bulk commodities; that 
is, minimum guarantees of imports into China.
  The wheat tariff-rate quota, for example, has the potential to lift 
China's imports from 2.4 million metric tons a day to 7.3 tons for the 
first year China is in the WTO and more afterwards. China will also 
give up any rights to export subsidies, a far cry from, say, Europe 
which has massive export subsidies; China going much, much further than 
Europe is today.
  In industrial goods, China will grant full distribution rights, 
retailing, repair, warehousing, trucking and more in almost all 
products over 3 years. And it will allow American companies to import 
and export freely. These are concessions that will fundamentally 
transform an economy which now operates by requiring both Americans and 
Chinese to use Chinese Government middlemen in these areas. It will 
make large tariff cuts to an average of 7.1 percent, and it will give 
up the quota policies at the heart of several industrial policy 
ventures.
  Another concession of special interest to my State of Montana is deep 
cuts in wood products, from levels reaching 18 percent today down to 5 
and 7 percent after WTO membership. And in services, China has made 
commitments in every sector. They are especially strong, as I noted, in 
distribution, but also extend to telecommunications, to finance, to 
audiovisual, environmental services, law, franchising, direct sales and 
more. These are very significant concessions which go most of the way 
to creating a commercially meaningful agreement.
  The U.S. negotiators deserve immense credit for their tremendous 
achievements of the past months, absolutely amazing, perhaps even more 
for their willingness to refuse bad offers in the past years and remain 
firm in the commitment to strong accession in all areas.
  Several issues, however, remain unresolved. I am especially and very 
strongly concerned that we are not accepting any rapid phaseout of 
nonmarket economy dumping rules or import surge provisions. We can also 
improve on the market access commitments in several of the service 
sectors. However, we should also understand that there is a point at 
which we should say yes. We should not set a goal of transforming 
China's trade regime into Hong Kong's by next New Year's Day. Rather, 
we should expect a good, commercially meaningful accession, and we are 
almost there now.
  Finally, let me say a few words about the broader interests involved. 
A WTO accession is a set of unilateral trade concessions; in this case, 
made by China. As such, it is in our economic and our commercial 
interest. It will create opportunities while making trade fairer for 
our working people and farmers. But it is also a piece of a larger 
strategy designed to create a more stable, a more prosperous and more 
peaceful Asia-Pacific region.
  China's economic integration into the Pacific region since the 
opening under President Nixon in 1972 has been immensely important to 
our long-term national interests. We can see that very clearly in the 
Asian financial crisis, for example.

[[Page S4735]]

  When I came to Congress, China was a revolutionary power, which would 
have used this recent currency crisis to spread disorder, spread 
revolution throughout Southeast Asia and the Korean peninsula. But 
today it is a beneficiary of Thai, Singapore, Korean and Malay 
investment, and these countries are also China's markets. China has 
responded to the crisis by contributing to their recovery through 
currency stability and several billion dollars in contributions to IMF 
recovery packages.

  The WTO accession will deepen and strengthen this process. At the 
same time, it will move China toward the rule of law, give Chinese 
working people, students and families more frequent, more open contact 
with foreigners and, thus, contribute to our work toward a China which 
has more respect of the law and more respect for human rights.
  Mr. President, the U.S. negotiators thus far have done an excellent 
job. They have already offered American farmers a ray of hope during a 
very difficult year. We are very close to accessions that will make 
trade with China fundamentally more fair for our country. It will then 
be up to the Senate, to our colleagues, to take the final step by 
making the normal trade relations we now offer to China permanent.
  I thank the Chair. I yield the floor, and I suggest the absence of a 
quorum.

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