The Heritage Foundation

Executive Memorandum #749 on Asia

May 30, 2001

May 30, 2001 | Executive Memorandum on Asia

Trade with China, But Avoid Strengthening Its Military

President George W. Bush's decision this week to extend normal trade relations (NTR) with China is good policy. Trade with China has created conditions under which portions of the Chinese population enjoy greater economic freedom and concomitantly less dependence on the state and Communist Party. Despite the recent disputes over China's treatment of American citizens and the return of the U.S. reconnaissance plane from Hainan Island, a free trade policy with China supports broad U.S. interests, particularly in expanding the economy's agricultural, industrial, financial, and manufacturing sectors. Moreover, America's Asian friends and allies rely on U.S. strength and leadership to induce China to abide by international norms and rules.

While supporting trade with China, President Bush must develop effective policies, in coordination and consultation with Congress, to address differences over such serious matters as security, religious freedom, and human rights. He must ensure that trade does not strengthen the Chinese military, which by more assertively demonstrating its power is threatening peace and stability in the region.

Renewing NTR
Until last year, the United States conducted an annual review of China before granting it the normal trade status (NTR) enjoyed by America's trading partners. Because the World Trade Organization (WTO) prohibits member countries from conducting such a review, Congress had to pass a law granting China permanent normal trade relations (PNTR) should it become a WTO member. Last year, after considerable debate, Congress approved PNTR (P.L. 106-286) by a vote of 237 to 197 in the House and 83 to 15 in the Senate. However, Beijing still has not met all the conditions necessary for WTO accession. It is discussing such contentious issues as domestic price supports for its agricultural sector with the WTO and the United States. For this reason, Congress must soon vote again on whether to approve the President's decision.

As a first step in the NTR process, President Bush should waive provisions in the Jackson-Vanik Amendment to the Trade Act of 1974 (P.L. 93-618) that prevent U.S. trade with any communist nation that restricts emigration. Today, even though few countries are interested in absorbing a potential 1.3 billion Chinese immigrants, the Chinese are free to travel internally and around the world. Thus, a waiver of the Jackson-Vanik Amendment is appropriate. Moreover, measures that restrict Chinese citizens from traveling to the United States are counterproductive. As recent history in Taiwan, Korea, and the Philippines shows, nationals who once were exiled in the United States or another Western country often returned home to transform their countries into market-oriented democracies. Specific measures are needed to address the way China deliberately harasses emigrants who return home as well as U.S. citizens and residents who travel there. The recent State Department travel advisory is a good start.

Lessening State Dependence
The National People's Congress passed legislation last year to permit a phased end to China's protectionist policies and to comply with WTO requirements, but strong vested interests in China do not want to see this happen. Many fear that, because China's farmers could not compete with foreign agriculture entities in an open market, large numbers of Chinese in this sector would lose income, leading to greater rural unrest.

The cadre making up the national infrastructure of Communist Party control over state-owned enterprises also oppose accession to the WTO. They fear they will lose power if foreign joint ventures select the most qualified and competitive managers to run their enterprises. In China's public security ministry and powerful Ministry of State Security, many Communist Party bureaucrats fear that they will lose their tight control over the populace and not be able to control the growing middle class whose lives are less regulated by the central government or the party. Nevertheless, senior party leaders seem committed to developing a market economy in China. Free trade will help to lessen individual reliance on the state.

Assuring Security
While President Bush should waive the provisions of the Jackson-Vanik Amendment and continue NTR for China, he should also ensure that American goods and know-how are not strengthening the People's Liberation Army (PLA), which is modernizing its forces to confront the U.S. military presence in Asia. This is not a Cold War containment policy, but good common sense. The President should:

  • Begin an immediate review of Export Administration and International Traffic in Arms regulations to ensure that trade with China does not improve the capabilities of the PLA; work with Congress to update the Export Administration Act (P.L. 96-72) and Arms Export Control Act (P.L. 90-629) to reflect changes in the availability of high-technology goods and manufacturing since those laws were enacted.

  • Direct the Federal Bureau of Investigation to identify and make public the identities of Chinese companies located in the United States that are clandestinely controlled by the PLA.

  • Put teeth into counterintelligence programs and Defense Department industrial security programs to protect emerging technologies and manufacturing processes; expand defense education programs to limit the success of China's spies, as well as education programs within American defense industries.

  • Forge with America's friends and allies a common approach to managing commercial and foreign relations with China; exclude from joint defense cooperation and research and development programs any foreign companies, located in nations allied with the United States, that transfer technologies or weapons systems to China that could threaten U.S. forces. Such companies should be forced to decide whether their long-term financial interests lie in strengthening the PLA or in cooperating with the United States.

  • Continue to meet with religious officials such as the Dalai Lama while the State Department carefully monitors China's human rights practices.

  • Give better treatment to Taiwan's representatives and promote deeper contacts between the U.S. and Taiwan armed forces.

The Administration must make it clear that it will hold Chinese officials and American businesses responsible for managing the risks that trade poses to U.S. interests.

Dr. Larry M. Wortzel is Director of the Asian Studies Center at The Heritage Foundation.

About the Author

Larry M. Wortzel, Ph.D. Visiting Fellow
The Kathryn and Shelby Cullom Davis Institute for National Security and Foreign Policy

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