The Political Interest Keep China Trade

By Michael Kramer

Bill Clinton, addicted to compromise, is again close to foolishly splitting the difference on a crucial foreign policy issue. The question this time is whether the U.S. should continue or retard the growing two-way trade between America and China. By June 3, the President must decide to extend or revoke Beijing's most-favored-nation trading status.

The tug between ideals and interests has produced a mush of mixed signals since Clinton took office. After saying before he was elected that he would deny MFN to China, Clinton continued the policy last May, but only conditionally. He threatened a cutoff this spring if Beijing's human-rights record failed to demonstrate "overall significant progress." It hasn't. Now, says House Foreign Affairs Committee chairman Lee Hamilton, Clinton "can't renew MFN unless he lies."

Clinton faces four choices. He can revoke MFN, affirm America's moral principles and cripple Chinese-American commerce, which last year totaled almost $40 billion. Gone in the process would probably be any chance of enlisting Beijing's help in rolling back North Korea's nuclear-weapons program. Gone too would be approximately 200,000 high-paying U.S. export jobs, which is why Treasury, Commerce and White House economic officials favor retaining MFN.

A second course would distinguish between goods produced by private and , state-run enterprises. Privately made Chinese products would enjoy MFN; the rest wouldn't. "Sounds good, but it's hard to see it working," says Michel Oksenberg, who was Jimmy Carter's top China hand. "The Chinese have an infinite genius for changing labels. And what would happen to the investments of those U.S. firms involved in joint ventures only partially owned by the state, or to products made privately with components supplied by government concerns?"

A third option would extend MFN with less rigorous trip wires. "Perhaps human rights could be a general condition rather than one that's filled with specific conditions," said Secretary of State Warren Christopher on March 13. Any compromise, he added, could "move the relationship to a new and more significant level." And a more hypocritical one as well.

Clinton's best bet would be to decouple the trade and human-rights issues entirely. Taiwan and South Korea prove that political liberalization follows prosperity. As a vibrant economy creates a robust middle class, ordinary citizens increasingly seek to influence government actions, pressure that even authoritarians must eventually accommodate. Revoking MFN would restrain China's economic growth, thus causing democracy's prospects to suffer.

Decoupling the issues, in fact, could increase Clinton's ability to criticize Beijing's internal policies (especially after Deng Xiaoping dies, when spasms of chaos and repression may occur as a struggle for power ensues). Free from fear that bashing Beijing would reignite the MFN debate, the President could openly embrace China's dissidents and encourage U.S. firms to voluntarily tie their China business to improved human-rights practices, as many American companies did when apartheid flourished in South Africa. If conditions so worsened that punitive actions were called for, the U.S. could champion cutbacks in international lending; China is currently the leading recipient of World Bank loans.

Above all, decoupling would obviate the need to lie. A forthright admission that a policy isn't working can project leadership and gain credibility for those who call it squarely. The choice is not whether the U.S. should isolate China. That is impossible. The goal is to avoid perpetuating an ineffectual linkage that could isolate America from China.