The Heritage Foundation

Lecture #667 on Asia

May 22, 2000

May 22, 2000 | Lecture on Asia

What Governors Have to Say About Permanent Normal Trade Relations with China

Recently I've been talking to people on Capitol Hill, on both sides of the issue, about why the overwhelming majority of America's governors support permanent normal trade relations (PNTR) with China and about some of the things I observed during my recent visit to China.

I thought I'd start out by talking about how I got involved in this issue in the first place. You're thinking: What is the big deal about a small, midwestern state like North Dakota and trade with China?

And I did originally approach the issue from the point of view of what was right for North Dakota. When I saw the items that were negotiated last fall in the trade agreement between China and the United States, I thought it was a good deal for North Dakota. We're an exporting state. We're the number one producer of eight different commodities, and it's important for us to be able to export our products. Bigger and more open markets provide better opportunities for North Dakota ranchers, for North Dakota farmers, and for North Dakotans in general.

As I looked at the U.S-China trade-negotiation documents, I saw, for example, that non-tariff quotas on wheat were increased. We used to sell 250 million bushels of wheat to China, but today we sell only eight or nine million bushels. Under a new agreement, that gap would close for my state. We looked at the provisions for beef and pork imports and saw huge reductions in tariffs--from 47 percent to 2 and 14 percent. So many elements of the trade agreement were indeed important for North Dakota, and that's why I got involved.

I think one of the issues we haven't pointed to enough is that the agreements provide that we will no longer have to work through the state-owned trading enterprises. One of the provisions allows exporters to work directly with private businesses in China. You can't imagine how important that is for a small state like North Dakota, where most of our manufacturing companies and producers are small. They're intimidated by the thought of working with a huge state trading enterprise. They don't know how to establish a relationship. This new agreement allows them to deal on a one-on-one basis with a new business in China, a new representative, a new importer, and establish a long-term relationship with a less forbidding partner. I think this is an element that is going to be very important for North Dakota.

So I talked about trade to people in my state, to farmers and ranchers, to our farm organizations. I talked to our economic development folks. We put the numbers together and said this agreement is good.

I looked back at our trade statistics with China for the last eight years, since I've been governor, and saw that trade with China has increased 560 percent. It's booming. Twenty-five percent of it is in commodity food products. The rest is in small equipment manufacturing, mostly on the agricultural side.

We also send over pilots, by the way. The University of North Dakota Center for Aerospace Studies trains weather forecasters, traffic controllers, and pilots, many of whom end up in China as well. It's been a thrill for me to stand at a graduation ceremony in Grand Forks, North Dakota, with Chinese pilots who have been exposed to the culture in a democracy and who will go back as agents of change in their country.

I figured if this agreement was good for North Dakota, it was probably good for other states, too. So I talked to other governors and discovered it was the same situation in their states. Exports were vitally important for economic activity and growth in their states. So Gary Locke, governor of Washington and a Democrat, and I, a Republican from North Dakota, drafted a letter from governors who support permanent normal trade relations with China. We ended up with the signatures of 47 governors.

We have seven governors who haven't signed on. (You might be adding it up in your head: 7 plus 47 equals more than 50. However, we have four territories that belong to our National Governors' Association.) Those governors are not signing for various reasons. Some didn't particularly like the language in our letter; they supported the idea but thought they would write their own letter, couching it in different terms. Others, for various reasons, just don't support it. But we think that we have an outstanding percentage with 47 signatures.

Because I was one of the people who was involved in putting the support letter together, President Clinton asked me to go on a trip to China with Agriculture Secretary Dan Glickman and some undecided members of Congress to explore the issues that are in play concerning China. These included not only the issue of economic expansion but also the issues of religious freedom, working conditions, and human rights.

I was pleased to take that trip, and I have to tell you it was fascinating to be in China. I had a perception of China of people doing exercises in the morning in the square with their uniforms on and marching off to work, like I saw in the old movies.

So it was incredible to be in Beijing and Shanghai and Hong Kong, which are the most modern cities that you can imagine. It was really impressive to me to be exposed to an expanding economy and the cultural changes that are taking place. We saw people who work in private enterprise as well as churches and temples being built.

We had a chance to meet with political leaders, reform leaders who are stepping forward at their own peril because they see the necessity of moving into a market-driven economy. They know they can no longer afford the subsidies to keep their business enterprises government-owned. They can't afford the subsidies to keep artificial production in wheat, for instance. And, as the four central banks have teetered on the verge of bankruptcy, they have had to cut back economic support levels and, of course, you see the resultant drop in wheat production.

The reformers see the need for private investment if they are going to feed their people, if they are going to build roads, food distribution systems, water systems, and sewage lagoons. They are moving into a market-driven economy with 24 million new small businesses in China today and 50 percent of the economy in the hands of the private sector.

Incredible change is going on there. But these leaders are taking a risk because the old-line communists are sitting over there waiting to take back control of the economy. They want to say: "See: It doesn't work. We have to go back to our old ways of central control." I think we need to support these new young reformers who are trying to forge a new way of governing.

We had a chance to meet with multinational companies that are operating in China, and I was impressed by their willingness to invest in the communities there. They are providing opportunities for their Chinese national employees through leadership and training programs to make their employees' lives better.

It was fun to talk to them about their investments in the culture. The business community is heavily investing in schools, distribution systems, town halls, and community gathering places because, with the sense of community and family that the Chinese have, they know that these are not only gathering spots but also agents of change.

We had a chance to meet with the middle managers in these companies, Chinese nationals, some of whom have traveled to the United States or been educated here. There are 50,000 Chinese students today in the United States. Most of them are expected to go back. They also are going to be agents of change when they return.

And the middle managers were excited. They had better jobs. They had training. They were buying houses and cars. They had an opportunity to see that the economic activity was beneficial to them.

And I asked them about what happens when they go home. What did their neighbors think? They said their neighbors were envious that they were making more money, that they have homes that they, and not the government, own. They were excited to be a part of the emerging economy, and they are really driving change in their culture and in their lives.

We had a chance to meet with blue-collar workers and talk with them about working conditions in China. We talked to them about what it was like before and what it's like now. I had a chance to visit with an auto parts worker in a facility now jointly owned by the Chinese government and a French automobile manufacturer. She talked about how cold it was in the past because they didn't have heat in the factory in the winter, and how they sweated so much in the summer because there was no air conditioning. And everything, of course, was done by hand. Now she works in a facility that is mechanized, that has climate controls, that has good working conditions.

She is pleased that she has a chance to work in such good conditions. She has gone to some leadership training. She manages over 110 people. And instead of the $400 a month in Chinese money that she was making before, she is making $3,800 a month, and she and her husband have just bought a new home. So the blue-collar workers are on the move there as well.

We met with entrepreneurs who had started businesses four and five years ago. At that time, they didn't know where to go, didn't have attorneys, didn't know where to get approvals from the government, didn't know how to get copyright and trademark protection, didn't know anything. They were forging a new way. Then we met with some entrepreneurs who had started their businesses just one or two years ago. Conditions had changed dramatically, and they were very thankful for the folks who had paved the way for them just a few years earlier.

I had a chance to meet with religious leaders. It was awesome to be in a Catholic Church in Shanghai and meet with Bishop Jin, who had been jailed for 27 years for crimes against the state. He was happy. He was not bitter. "I spent 27 years in jail so that I could say my God comes before my country and now I can say that." And he was pleased. It was incredible for me to be able to kneel down in prayer in a Catholic Church in the middle of a communist country surrounded by all those evil forces.

And Bishop Jin was also pleased to point out that when he went into jail there were about a million Christians in that country. At the same time that the government was trying to stamp out religion, Christianity grew, and now they estimate that there are 20 million Christians in China, and 5,000 of them come to his church's four services every Sunday.

He is 85 years old, and his message was this: You've got to take the long-term view. If we're going to see social and cultural change in China, he said, we need an economic lift. We need that lift so a culture thousands of years old and moving at a glacial pace of change continues to change. He said, "I support permanent normal trade relations because I think that the economic activity is what will give us the changes we need to drive forward the religious freedoms and cultural changes in this country." These are the people, the agents of change, that we had a chance to meet over there.

We tried to address the issues that the critics of a trade relationship with China are making. They point to human rights violations; a bad record, no doubt. They talk about the lack of religious freedom; there's no question that's a problem. These are honest concerns that are put forth by people on various sides of this issue. But I am firmly convinced that trade is a precursor of social change, and it is vitally important for us to enter into this agreement.

I told you that I went over there originally because of the benefits to North Dakota, and I have to admit I was provincial about my support for permanent normal trade relations. Returning from this trip I am absolutely convinced that this is necessary for the United States and for the people of China. I believe that we have a chance to forge a relationship that is going to be very meaningful for change in that country.

Now, Governor George Bush has an interesting comment about this, and I think he's right on. He says that economic freedom creates habits of liberty and habits of liberty create expectations of democracy. From what I have seen in China, I think that statement is true.

The improved education, the ability to drive social change, the ability of people to have more access to information, to consumer goods, this is what will drive change in that society. And I firmly believe that if we open up trade relationships between China and the United States, we get a chance to export our most valuable asset, and our most valuable asset is our culture of freedom.

We get a chance to export our ideas about democracy, about freedom of religion, about workers' conditions, and human rights. In addition to our products, we get to send over our ideas. I think it's very important that we continue to build relationships, that Congress passes permanent normal trade relations, that China joins the rules-based World Trade Organization. This is what will drive the needed social, religious, and human rights changes in China.

The Honorable Ed Schafer is governor of North Dakota and chairman of the Republican Governors Association.

About the Author