July 27, 2000

MEMORANDUM TO: OPINION LEADERS

FROM: GARY SCHMITT

SUBJECT: China and WTO, and China Nonproliferation Act

According to recent news reports -- The Financial Times (July 21) and Inside Trade (July 25) -- China has thrown two large spanners into the World Trade Organization’s efforts to finalize the accession protocol governing China's entry into the WTO.* First, Beijing is demanding that the protocol include provisions that would stipulate that Taiwan is part of mainland China. And, second, the Chinese are attempting to back away from pledges on such matters as export subsidies for agricultural products and conditions for foreign investment in China. Indeed, one official involved in the negotiations, said: “There’s disagreement on almost everything.”

Proponents of China’s admission to the WTO have long argued that the integration of China into the WTO would impel the country to become more like its new, rule-based, agreement-keeping trade partners. In short, the WTO would change China. But, as Beijing’s willingness to renege on previous commitments in the areas of proliferation, intellectual property, human rights and now trade and investment should remind us, letting such a huge, dictatorially-ruled country into the WTO runs the opposite risk. Moreover, it is equally revealing that while supporters of permanent normal trade relations (PNTR) with China have assiduously worked to separate the issue of trade from all national security concerns, China’s leaders seem to be operating under the “old fashioned” notion that they can use the prospects of increased trade as leverage with us to advance their agenda vis a vis Taiwan.

With the House having passed PNTR for China already, it is now the Senate’s job to see to it that some judgment and balance is applied to U.S. policy toward China. To start, the Senate should not schedule a vote on granting China PNTR until the WTO accession protocol is completed and has been thoroughly reviewed by member states. It is important that the Senate not act before all the facts are in.

In the meantime, there is a struggle going on in the Senate about whether even to take up the China Nonproliferation Act, sponsored by Senators Fred Thompson (R-TN) and Robert Torricelli (D-NJ).

Although there is so much to be done when it comes to correcting Clinton Administration policies on China, the proposed measure is a reasonable first step on a matter that lies at the heart of our long-term security interests. Conversely, a failure to take up the legislation and pass it would send a signal to friends and enemies around the world that virtually nothing, not even national security, is more important to us now than the prospect of increased trade with, and investment in, China.* An accession protocol is necessary to make coherent the host of particular agreements on market access and trade negotiated by individual WTO member states with China, and to set out the mechanisms to ensure China’s compliance with the accord.