Twisting Off the Hook

By GEORGE J. CHURCH

They called it a big deal. A U.S. delegation went to Beijing over the weekend to discuss letting Chinese listeners hear Voice of America programs now drowned out by China's own broadcasting on the same frequencies. But Beijing had pledged months ago to negotiate; welcoming the delegation was hardly a new or a large concession.

But a senior State Department official chose to pretend that it was, hoping to endow this minor action with some real, if dubious, importance in helping satisfy U.S. demands for "significant progress" in China's human-rights record. His reaction was one of a number of clues that President Clinton has decided against cracking down hard on China by cutting back trade. Another sign was a secret visit to Beijing by a special envoy, former Ambassador to Japan Michael Armacost; his job reportedly was to coax the Chinese leaders into other concessions that the White House could seize on to justify that decision.

Officially, Clinton is still pondering the decision he must make by next Friday. But all indications are that the President will continue to give Beijing some form of the most-favored-nation status under which Chinese goods enter American markets at low tariff rates. "I think he will find a way not to interrupt MFN," predicted House Speaker Tom Foley, who will have to round up votes to prevent Congress from overturning a Clinton decision. Since a year after the Tiananmen Square massacre, lawmakers have been pressing the White House to punish Beijing by withdrawing MFN status; twice in 1992 lawmakers forced George Bush to veto such moves. That drew from campaigner Clinton an accusation that Bush was willing to "coddle tyrants" in Beijing. Clinton implied he would use trade threats as a club to force the Chinese to behave on human rights -- yet another campaign pledge he now seems to find it wiser not to keep.

There is actually nothing special about MFN status; it is enjoyed by 182 countries that trade with the U.S., vs. only nine that lack it. But there is something quite special about losing MFN. Revocation would result in crippling tariff increases on the $30 billion worth of goods China sells to the U.S. each year -- everything from steel pipes to shirts, sneakers and stuffed animals. According to the argument Clinton seems to have bought, taking away MFN would hurt both the Chinese and U.S. economies because Beijing would retaliate against American firms that are creating a multibillion-dollar market in China and in the process penalize the most progressive sector of Chinese society, its burgeoning entrepreneurial class. The anger of the regime might even worsen the plight of ordinary Chinese citizens.

Clinton, however, is unlikely to extend MFN without any conditions. The President boxed himself into a corner a year ago by issuing an Executive Order that made any extension of MFN past June 3 dependent on "significant progress" by China on human-rights issues. Given the meager improvements so far, Clinton & Co. are not going to find it easy to make a plausible case to the human-rights lobby -- or the American public. In a TIME/CNN poll conducted last week, 62% of respondents felt that encouraging human rights in China was more important than trade, and 60% said the U.S. should require China to show more progress before renewing MFN. In the view of experts such as Douglas Paal, president of the Asia Pacific Policy Center, the President can contend that Beijing has made such progress only by telling "lies."

The betting now is that Clinton will couple a general continuance of MFN with some largely symbolic exceptions. One idea is to raise tariffs sharply on products made by Chinese state-owned industries or factories controlled by the People's Liberation Army. Clinton could claim that he is penalizing Beijing without hurting China's private entrepreneurs.

Noordin Sopiee, head of Malaysia's Institute of Strategic and International Studies, dismisses partial sanctions as "a compromise which will satisfy no one and will merely strengthen Clinton's image as a wishy-washy leader. It's a crazy idea, and it won't work." American experts agree; Lyn Edinger, a former commercial counselor at the U.S. embassy in Beijing, says, "Targeting state enterprises will be a nightmare and virtually unenforceable." The owners of many Chinese factories are a mixture of private, state, military and sometimes even American interests; figuring out which companies to penalize could drive the U.S. Customs Service insane. Assistant Secretary of State Winston Lord has suggested targeting specific products instead. But with a few exceptions such as assault rifles, it is not easy to discern which ones come from state or army enterprises.

Beijing's leaders are, like Clinton, prisoners of their past rhetoric. They have insisted so loudly on extension of MFN with no conditions that they might have to retaliate against even pinprick sanctions. Washington expects dollar- for-dollar revenge: if the U.S. restricts $1 billion worth of Chinese imports, China would take some kind of action against $1 billion in U.S. goods or services. The U.S. would suffer far more: $1 billion lost would amount to 11.4% of the $8.8 billion annual U.S. sales to China, but only 3.3% of the $30 billion China sells each year to the U.S.

Any retaliation might threaten a market for U.S. exports in aircraft, telecommunications equipment, wheat and other food products that is expected to grow enormously in coming years. Chief executives of seven of the biggest U.S. companies doing business with China signed a letter to the President estimating that "in 10 years our cumulative sales to China will reach $158 billion, assuming normal relations." Clinton evidently got the message: in discussions with his advisers, he repeatedly ticked off the exact dollar losses for Boeing and McDonnell Douglas airplane makers -- and the electoral votes he could put at risk in states crucial to his re-election.

The most telling pro-MFN argument is that trade threats are of no use in making the leaders of China grant more political liberty -- especially now. The country is going through a bumpy transition from a managed to a market economy: inflation has hit an annual rate of more than 20% in big cities, and unemployment is growing as the government shuts down inefficient state industries. Scattered worker protests and strikes have struck fear in Beijing that the authorities could lose control. A leadership succession struggle cannot be long postponed: top boss Deng Xiaoping is approaching his 90th birthday and ailing. In such an atmosphere, Beijing's chiefs will do anything they think necessary to keep a lid on disorder, MFN or no MFN.

Human-rights organizations, however, are leaning hard on Clinton to be tough. They point to China's continued export of goods made with prison labor: under Clinton's own Executive Order, Beijing must stop that to retain MFN. Harry Wu, a former Chinese political prisoner, showed Congress tapes of prisoners at forced labor that he had secretly filmed on a five-week trip this year. Says Wu: "Fifty percent of Chinese rubber products come from chemical factories that employ forced labor." Human Rights Watch/Asia says latex gloves used by doctors were exported as recently as last January only after being inspected in Beijing's Prison No. 2. One prisoner tried to slip a note into a glove but was reported by other inmates and then beaten by guards with electric batons -- not an unusual occurrence in that lockup.

Whatever Clinton decides is not likely to be overturned by Congress, where opponents could not muster the two-thirds votes needed to override a presidential veto if legislators forced a showdown. But Clinton will take a political roasting no matter what he does. Administration officials say he has come to see the wisdom of extending MFN and delinking it from human rights, which he could promote better by diplomatic means. But politically he cannot afford to take such a forthright stand yet. Instead, the President seems to be aiming for the now familiar sort of compromise that pleases no one and accomplishes little.

With reporting by David Aikman/Washington, Sandra Burton/Hong Kong and Jaime A. FlorCruz/Beijing