[Congressional Record (Bound Edition), Volume 146 (2000), Part 12]
[Senate]
[Pages 17964-17967]
[From the U.S. Government Publishing Office, www.gpo.gov]



              PERMANENT NORMAL TRADE RELATIONS WITH CHINA

  Mr. REED. Mr. President, we have, for many days, been debating the 
momentous decision of extending permanent normal trade relations with 
China.
  At the essence of our debate is a very simple question: Will we 
continue a policy of economic engagement with China or will we turn 
away? I believe we have to continue this policy of engagement. We have 
pursued this policy for almost 30 years. It has contributed to profound 
change in China. But it has not transformed China into a classical 
liberal democracy. It has not led to the establishment of a multiparty 
democracy, with an independent judiciary protecting the rights of 
China's people, particularly the rights of expression. It has not 
cramped China's policy which supports the proliferation of weapons of 
mass destruction. But it has placed China on a very different 
historical trajectory than could have taken place.
  This notion of the change brought in China came to me with great 
force last August when I was traveling through China. I was at Dandong 
on the Yalu River. We were looking across into North Korea. One of our 
guides pointed out that in the 1950s and early 1960s, North Korea had a 
higher per capita income. North Korea was seen as the model of 
socialist development in Asia. North Korea had had a heavy industrial 
sector that was competitive with many parts of the world.
  Yet today--at that time last year--we were peering into a country 
that was starving, that had an economic system in collapse, that we 
were concerned could be so unstable they could threaten the peace of 
the region.
  They did not choose the trajectory of international trade. They did 
not choose the path of engagement with the West. One can ask: Had China 
gone that route, had we not tried to engage China, would we be facing 
today a country with over 1 billion people hermetically sealed in an 
economically failing and ideologically driven country, armed with 
nuclear weapons? If we were confronting such a country, I think we 
would be much worse off than we are today, even with the frustrating 
and uneven relationship that we have--and we must admit we have--with 
China. So I believe that we must continue this policy of engagement, 
which

[[Page 17965]]

is at the heart of the extension of permanent normal trade relations.
  China is now a part of the world and the world economy, but it is 
also still China. It is a mixture of modernity and also a mixture of 
the old, indeed, the ancient.
  One of the examples that I have seen in China--this one occurred just 
a few weeks ago when I was traveling there again--is the contrast in 
Wuhan. Wuhan is a city on the Yangtze Sea in China. It is an old city, 
not like the new cities on the coast such as Shanghai and other cities. 
It is in some respects the Pittsburgh of China. It is a highly intense, 
heavily industrial city. You can tell that from the extraordinarily bad 
air pollution.
  There are two companies we saw. One was the Wuhan Iron and Steel 
Company. It is right out of the industrial age. Andrew Carnegie would 
have been right at home, except for the 386 computers that were running 
the facility.
  Then we saw another factory, the Yangtze Fiber Optic Company. It 
could have been in Silicon Valley in California, producing fiber optic 
cable, producing it to world standards. Initially, it was a product of 
investment by the Dutch company Phillips, now it is a wholly owned 
enterprise by Chinese owners. These are the examples of the economy--
the old and the very modern.
  In addition to that, when you go out into the villages, you see 
perhaps the truly ancient. As you drive through China, you see 
individuals hammering away, as they have for thousands of years, 
repairing bicycles with hammers and not much else. You see farming 
activities that could go back thousands of years. It is a diverse 
country. But it is a country that has been profoundly affected by 
change in its contact with the West over the last several decades.
  The other factor that is being seen as a result of this contact is 
the pressures within China generated by this change. We sometimes, and 
quite rightly, look to the effects on the United States by this trade 
deal. We presume that the only effects that are felt in China are 
positive, are beneficial, that in fact they are not going to make 
difficult choices and decisions. In fact, the reality is they are 
already seeing the effects of this change, of this contact with the 
West.
  In the New York Times recently, there was an article about a factory 
in China where the workers, who were being let go because of the 
consolidation of this factory by their Western owners, were seizing the 
management, were blockading the facility, were effectively revolting 
from the effects of international trade.
  There are examples of violence where inefficient state-owned mines 
and enterprises are threatened with closure and workers are literally 
rising up to demand that these facilities remain open.
  So this change has also affected China. This change is recognized by 
the leadership. I had the opportunity to meet with Zhu Rongji, the 
Premier, while I was there just a few weeks ago. They understand very 
well that economic change will lead to political change. They might not 
welcome it. They might indeed try to avoid it. But they know that 
political forces, as well as economic forces, are unleashed when 
markets are open. That is one of the effects we will see through this 
extension of permanent normal trade relations.
  For many reasons, I believe to step away would be a mistake. It would 
immediately embolden those who are our most bitter antagonists within 
China. It would, in many ways, take away the legitimacy of those forces 
in China, not liberals, but pragmatists who have sought a relationship 
with the West, and the United States in particular, that emphasizes 
trade over hostility, that emphasizes engagement over conflict.
  To step away would also allow industrial nations around the world to 
take the benefits of our deal, the benefits of our bilateral 
relationship, the benefits of open trade with China, while we 
ineffectively try to use our abstention, our veto of China's entry into 
WTO, as very ineffectual political leverage to move them.
  To step away would also represent a serious rupture in our relations 
with China that could not be explained away as merely a dispute about 
trade, the technicalities of trade. It would harden attitudes and 
opinions within China and, indeed, here in the United States at a time 
when we need a constructive and candid dialogue about our differences. 
And our differences are real. In order to discuss these differences, in 
order to maintain this dialogue, the extension of PNTR is essential.
  It is quite evident at this juncture that a majority of my colleagues 
in the Senate find these reasons compelling, and PNTR will pass. But 
looking ahead, we should, at this point, be very cognizant of the 
possible consequences of PNTR. It will not be a panacea. It will not 
change China overnight. It will not lead to a huge increase in American 
exports to China. It will, in fact, create consequences that we may 
find very difficult. In fact, one of the points I tried to raise with 
Premier Zhu Rongji is that our expectations of China after PNTR will 
collide with the reality of China and may, indeed, usher in a period of 
more tension rather than less.
  Now China wants desperately to be part of this commercial system that 
is made up of the United States and our major trading partners--for 
want of a better term, ``first world'' countries--all in precise terms, 
all carrying a sense of who the players are. But this system has some 
embedded values with which the Chinese will have to come to grips.
  Our system emphasizes the protection of property rights. It also 
emphasizes the expectation of the regularity of governmental action. 
That is a polite term for ``no corruption.'' That is at the heart of 
our trading system. China has to come to grips with that.
  Moreover, I do not believe China can divorce itself from even more 
fundamental values that are part and parcel of the world outside of 
developing countries. They start with respect for human rights, which 
is at the core of our democratic values, and they include protections 
for workers and the environment. We may have been unsuccessful in 
getting into these agreements, with force and with effect, language 
regarding human rights and worker rights and environmental rights, but 
no country or economy in the world can operate indefinitely today 
without recognizing these rights. In a world of increasingly 
transparent borders, the lessons of the economic, social and, indeed, 
one would say, moral success which has steadily improved the life of 
those who live in market economies in the West, do not escape the 
people in China and the people around the world. To the extent that 
they open themselves up to trade, they open themselves up to exposing 
these values to their own people.
  China has a monumental task as they embrace this notion of free 
trade. It is not a one-way street. It is a two-way street. They face 
the task of transforming a system that is seriously undermined by 
persistent corruption, that pays scant respect to individual rights, 
that chooses order over law, and is obsessed with the need to keep 
millions of people working in an economy dominated by inefficient 
state-owned enterprises. Add to those domestic problems that are real 
and palpable the fear that internal disorder will lead to the 
exploitation of China by outside forces, a situation that dominated 
Chinese history in the last century and up until the 1940s.
  In one respect that is one of the major reasons why they are 
militarily provocative in many ways to us, because to us they look as 
if they want to, perhaps figuratively, take over the world. In China, 
they recognize that recently their country was divided by Americans, by 
British, by Germans, and that their country was ruled by others rather 
than themselves. All these forces are at play.
  The tremendous challenge to transform this country, the fear of their 
own security as a nation, because of these realities, we should not be 
surprised if China promises today more than it intends or even can 
deliver tomorrow with respect to these agreements.
  In an article in the American Prospect, James Mann, who is a very 
astute observer of China, pointed out that we frequently develop 
perceptions about China that are different than the reality of China. 
Many perceive China

[[Page 17966]]

today as this modern country that is an economic monolith of force, of 
incredible production, a force of endless and cooperative labor. They 
also see it as a monolithic political system, with the Communist party 
dominating, that is capable of turning on a dime, turning the switch 
left or right. The reality is more complicated.
  The Chinese Communist Party plays the central role in the country, 
but it is an institution with internal factions. Some favor engagement 
with the West. Some disfavor it. Some harken back to the Maoist 
Cultural Revolution as the zenith of China. Others, quite properly--I 
hope the majority--reject that as a fantasy. But it is also a central 
authority that is constantly challenged by its provinces, constantly 
challenged by local political leaders. The modernity of China is so 
evident, if you go to Shanghai, if you go to Hong Kong, certainly since 
it has not been absorbed back into mainland China. This modernity 
rapidly diminishes as you go away from the coast, as you go to the 
older cities, Wuhan and Shenyang, which years ago was known as Mukden, 
and as you travel to the small villages. Even with the wholehearted 
support of the leadership and the commitment of the party, it is hard 
to make things change.
  Mann relates a meeting between President Nixon and Mao Zedong in 
1973. President Nixon opened with a bit of flattery by saying: 
       The Chairman's writings have moved the nation and have 
     changed the world.

  Mao, without missing a beat, retorted:

       I haven't been able to change it. I have only been able to 
     change a few places in the vicinity of Beijing.

  The power, the capability, the willingness of China to change is 
questionable. But we know with the advent of WTO, even without WTO, 
with the continued pressure of interaction internationally, China will 
have to change. It has to reform inefficient industries while it still 
tries to maintain current employment and create 18 million jobs a year 
for new entrants into the labor force. This task alone has led to angry 
and sometimes violent conflict. It has to overhaul its justice system. 
It has to root out corruption. It also has to convince a very cynical 
population, particularly cynical about the Communist Party, that their 
future is going to be better rather than worse.
  This is not an apology of China. This is, I hope, a statement of the 
reality of the challenges they face and the challenges that we have to 
understand as not only trading partners but as major powers in this 
world together.
  In this collision between faithful implementation of WTO rules and 
the prospect of profound change that faces China, the Chinese 
leadership will be more than tempted to delay or undermine or 
misconstrue WTO rules. That, I would posit, is a very high probability. 
When this happens, ironically the business community that is descending 
upon us today to open up China, to get China into WTO, will descend 
upon us with equal force and say: Get tougher. And even without 
scrupulous adherence to the WTO, change is going to come to China. If 
this change further exacerbates the plight of millions of workers, the 
leadership could embark on a strongly nationalistic and assertive 
foreign policy as a means to galvanize support, to distract a 
disenchanted public from economic shortfalls. This could lead to more 
proliferation, more bellicose threats to Taiwan, the kind of military 
rumors that we all find disconcerting when it comes to China.
  Having said all this, having painted a picture of what, in my view, 
are some of the realities of China, and having very little confidence 
that this arrangement will be adhered to scrupulously and fairly and 
routinely and quickly, one might ask: Then why do it?
  We might not be getting a lot out of PNTR. Indeed, by voting for 
PNTR, we may only be trading the certainty of hostility for the chance 
to continue a relationship that is frustrating at best. But this 
relationship is critical to stability in the region and around the 
globe. For this reason, national security reason, if you would so 
describe it, this opportunity for stability, opportunity for time to 
work out some of these very fundamental problems is worth the effort.
  We should also understand, as I have described the rigorous change 
that might come to China, that this agreement will not be painless for 
the United States. There will be economic sectors, communities, 
families who will see their lives changed. We hope for the better, but 
we know that change works both ways. Industries are less competitive in 
certain cases. Products can be produced more efficiently, more 
effectively, more cheaply overseas, displacing American workers. So we 
have to recognize, too, that our response to this issue is not simply 
passing this legislation this week. It is continuing our efforts, 
indeed, redoubling our efforts to ensure that we have an education 
system in the United States that can prepare people for this world of 
intense competition, that we have a health care system that will allow 
families, particularly children, to have access to the best care in the 
world, that we will have a disciplined fiscal policy in this country 
that will provide the foundation, along with sensible monetary policy, 
for the continued expansion of our economy so that those economic 
benefits can flow not only to the very few but to all Americans.
  Our task is not to reject PNTR. Our task, if we accept PNTR, which I 
suspect we will, is to ensure that our efforts are directed to improve 
the quality, the competitiveness, the abilities of our workers. When we 
do that, we will have much less to fear about the disruptive change 
that will come through PNTR.
  Now, I have spent some moments speaking about the major themes I see 
emerging with respect to PNTR in relationship to China. Let me take a 
few more moments to talk about the tangible aspects of this legislation 
before us. This legislation is unlike other trade arrangements that I 
have debated and voted upon, specifically regarding NAFTA, where we 
were lowering our tariff barriers and opening our markets, and we were 
looking at a comparable lowering of barriers in Mexico.
  This is a situation where our markets are already open to China. Our 
markets have been open for years. This is the first time, though, we 
have had meaningful tariff reduction by the Chinese, meaningful 
elimination of nontariff barriers by the Chinese, opening up of a broad 
range of American industry--industrial, service industries, all of 
them--so that they can enter into China, allowing our companies to 
operate without necessarily having Chinese partners, allowing our 
companies to have their own distribution systems within China. This is 
a deal, economically, that represents concessions by the Chinese in 
terms of tariff barriers, nontariff barriers, entry of American 
business, and investment with very little, if any, concessions on our 
part because the reality is we have already, in effect, made those 
concessions years and years ago.
  The agreement binds tariff rates that China will charge on our goods 
because of the WTO framework, so that it can't unilaterally raise the 
tariffs. As I mentioned before, it covers a broad array of American 
products, banking, insurance, telecommunications, business, and 
computer services--all of which have had a difficult time getting into 
China. It also attempts to protect in a very meaningful way potential 
surges in goods of China coming in to the U.S. It allows us to use some 
domestic dumping tools that we already have in our legal inventory. It 
has gone a long way to try to counteract a surge of Chinese products 
coming in.
  But opponents, and indeed proponents, of this legislation point out 
an inescapable fact: We are running huge trade deficits to the world 
and, in particular, China. These trade deficits are something we have 
to deal with. Coincidentally, today, it was just announced that the 
trade deficit has hit an all-time high. It continued to break records 
this spring as foreigners kept pouring investment into the American 
economy and Americans stepped up their buying of foreign goods. We have 
a huge problem with our trade deficit. It is a ticking time bomb. China 
is a

[[Page 17967]]

big part of it, but China is not the only part of it.
  Interestingly enough, a rapidly increasing percentage of American 
imports now comes from nations where wages are actually higher than in 
the United States--including Switzerland, Germany, Denmark, Sweden, and 
Austria. They all enjoy booming exports from the United States. The 
current stereotypical thinking is that cheap wages in China is why they 
proliferate all their goods, and that is our problem; we are competing 
the heck out of the old European countries. But it turns out that is 
not the case either. In this world, company productivity, efficiency, 
quality in the workforce, and to be productive are just as determining.
  My point in all of this is that we have a trade deficit, but it is 
not solely, exclusively a function of China. I believe the response to 
that is not rejecting PNTR. It is first recognizing consciously the 
difficulty and beginning consciously and deliberately with respect to 
all of our trading partners to get more American products into their 
markets, to properly look at the techniques they are using to get their 
goods into our market, and to, in effect, look at this problem not as a 
Chinese problem but as an American problem. And it will be an American 
problem if we do not pay sufficient attention. It will be manifested in 
a sudden and rapid deterioration of our currency if enough forces come 
into play.
  At present, we are living in a world in which the security of the 
American market, the attractiveness of our investments, rules and 
regulations of the SEC, and a host of other things, make America a safe 
haven, a place where you want to put your money. But there may come a 
day when investors--and not principally Chinese investors, but others--
decide they are going to start selling American currency short because 
they can put the money elsewhere.
  Now, we have all seen the benefits of trade with China. I have seen 
it in Rhode Island. It has been growing from a very small base to a 
moderately larger base, and it continues to grow. In fact, years ago, 
one of the first glimpses I had of the global economy was going to an 
Italian parade on Federal Hill in Providence, RI, meeting a gentleman 
with whom I chatted. I took him to be a jewelry worker or somebody who 
worked in the plant. It turns out he owned that business in Rhode 
Island. We were chatting and he asked me, ``Have you ever been to 
China?'' That was 5 or 6 years ago. Then, he casually said he owned an 
aerosol factory in Beijing. So I knew when you go to an Italian 
festival in Providence and chat with a businessman and he owns an 
aerosol factory in China, the world is getting much smaller. It is 
happening all across the country.
  What we have tried to do in this agreement--we, the negotiators--is 
to recognize that some of our products that are very dear to the hearts 
of our economy will get some benefits. For example, on precious metals 
and jewelry--a huge part of the Rhode Island economy and still an 
important part--China will reduce its tariffs from 40 percent to 11 
percent. That, we hope, will help. In terms of information technology 
products, that is something we would like to be a bigger part of the 
Rhode Island economy, but it is a growing part. China will eliminate 
all duties on computers, electronics, fiber optic cable, as well as on 
scientific and measuring equipment. We have some of the oldest 
industrial measuring companies in the world, such as Browne and Sharpe; 
they, too, will benefit. And there are several more products where we 
can see advantages that will accrue directly to my home State of Rhode 
Island.
  Also, there is just a general benefit to the businesses and workers 
of America. It is very much manifested in small- and medium-size 
businesses because they are doing more and more trade with China. It 
has doubled in the last 5 years from about 3,100 small- and medium-size 
businesses trading with China to about 7,600 trading today. That should 
increase even more. Part of this arrangement in the President's 
proposal in terms of making PNTR work is making the Department of 
Commerce more active in promulgating trade with China--going out and 
educating small- and medium-size businesses about the advantages of 
trade with China, and show them through web sites and informational 
brochures how to get into the Chinese market. Once again, I believe--
and maybe this is the essence of our mutual faith in this country--that 
once our business-
people and our workers have the idea and the knowledge to go out and do 
something, they are going to do it and do it very well.
  As I mentioned previously, we have already built in some protections 
against inevitable, or at least possible, surges of Chinese imports 
into our country. We have special provisions that will last 12 years, 
which deal with market disruptions and will not be limited to any one 
product but to all the products the Chinese may export to this country. 
We also will still have access to sections 301 and 201, and anti-
dumping mechanisms that are American laws, but the Chinese have agreed 
to allow them to be used in this transition and in this implementation 
of PNTR and WTO.
  Congressman Levin of Michigan, as part of the bill we are considering 
today, has also created an executive-legislative commission that will 
oversee not only the trade impact but also the human rights issues that 
have been raised time and time again on this floor. This commission 
will be another vantage point from which we can assess and evaluate our 
relationship with China and their fidelity to the agreements they have 
signed.
  The long and the short of it is that this is an agreement in its 
details which gives advantages to the United States which will help us 
and which I believe should be supported.
  We are at a point where this measure I believe will pass. We are at a 
point at which we are embarking on a continuation of our relationship 
with China, but again a relationship that is still troubling to many.
  PNTR will not cure all the defects we see in China, nor eliminate all 
the defects they see in the United States. But it will continue to give 
us a framework to be engaged. It will continue to give us the 
opportunity and the time to work at some of these very fundamental 
problems. It will challenge the Chinese in many respects to do as much 
as we will be challenged --some would argue, even more.
  We, fortunately, have a system of government that is not dominated by 
a bureaucratic--and one would say anachronistic--single party. We have 
a citizenry that is educated. We have social networks. We have Social 
Security. We have Medicare.
  China--which is one of the ironies of that great socialist bastion--
has no system of national health care, has no system of pensions, has 
no system of Social Security. It is all tied into the terribly 
inefficient state-owned enterprises. And if they try to change these 
state-owned enterprises, they are going to have to create, in effect, a 
social welfare system, which we already have in place.
  But I also don't want to minimize the fact that in the lives of many 
American families, this legislation could force change. But the 
opportunity to continue this engagement, the opportunity to insist that 
the Chinese not only participate in a world order but be responsible 
for values of that order, is an opportunity I don't think we can pass 
up at this time.
  I will support this measure. I also look forward to the opportunity 
to come back here again when, in implementation, we see that they fall 
short; when, in implementation, they see us as falling short; but just 
the opportunity, and I think to be able to have a forum to carefully 
discuss these issues. It is better than turning away from China. It is 
better than inducing hostilities. It is better than the alternative.
  Mr. President, I yield the floor.

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