The China Game Plan

Dec. 21, 2004
Billions of dollars in business are at stake.

Borrowing a tactic from last month's NCAA basketball tournament, the Clinton Administration is applying a full-court press as it drives to gain Congressional approval of permanent normal trade relations (PNTR) for China. "A vote against PNTR will cost America jobs, as our competitors in Europe, Asia, and elsewhere capture Chinese markets that we otherwise would have served," cautions President Clinton. Between 1991 and 1998, the last full year for which U.S. Commerce Dept. country data are available, U.S.-China trade advanced to US$85.4 billion from $25.3 billion, a 238% increase. Continuation of this impressive trade trend line is at stake in the upcoming vote. "Failure to approve PNTR closes the door on U.S. trading opportunities while the rest of the world benefits from access to the huge China market," emphasizes Dennis Slater, president of the Construction Industry Manufacturers Assn., Milwaukee. Commerce Secretary William M. Daley, the political master who secured Congressional approval for NAFTA in 1993, is leading the Administration's approval effort on and off Capitol Hill. Other prominent players include U.S. Trade Representative Charlene Barshefsky and Treasury Secretary Lawrence H. Summers. However, with anti-China sentiment running high among lawmakers, there's no assurance that this core of Cabinet superstars can slam-dunk an Administration victory. A couple of guys named Clinton and (Al) Gore probably need to be in the game as well. "Whether the China vote succeeds or fails depends on the president and vice president," stresses Fred Webber, president and CEO of the Arlington, Va.-based Chemical Manufacturers Assn. (CMA). "For it to succeed, they are going to have to provide strong and convincing leadership." In the meantime, there's no question but that Washington is playing in a high-stakes bilateral business game -- particularly for U.S. manufacturers in the electronics, aerospace, and chemical industries. PNTR "will induce the greater opening of a market of 1 billion people to [the] American high-tech industry, providing potent new fuel for the very industry that has been the prime engine of America's current unprecedented prosperity," believes William T. Archey, president and CEO of the American Electronics Assn., Santa Clara, Calif. "We estimate that China will purchase 1,800 aircraft over the next 20 years, worth $125 billion," says John W. Douglass, president and CEO of the Washington-based Aerospace Industries Assn. Recent U.S.-China aerospace trade hasn't exactly been shabby, either. The U.S. exported $3.73 billion worth of aerospace goods to China in 1998, generating an estimated 45,600 jobs for U.S. workers. China is a $90 billion market for chemicals, with U.S.-China trade topping $3.4 billion last year, notes CMA's Webber. By CMA's calculations, the U.S. posted a chemical-trade surplus of $526 million with China in 1999. Overall, however, the U.S. runs a sizable deficit, with imports from China outvaluing exports five to one in 1998. "A lot of members of Congress may still believe that [PNTR] is a vote to allow China into the WTO [World Trade Organization]," notes Michael E. Baroody, senior vice president for policy, communications, and public affairs at the National Assn. of Manufacturers, Washington. "The reality is that China will join the WTO no matter what we [in the U.S.] do. The question is whether we choose to sit out the race to enter the world's biggest consumer market," he stresses. "Passing PNTR ought to be job one for this Congress," insists Thomas J. Donohue, president of the U.S. Chamber of Commerce, Washington. "This vote is about whether we take advantage of an unparalleled opportunity for our [U.S.] companies and our workers. Or [whether] we sit on the sidelines and watch numerous foreign competitors eat our lunch." Within the next 30 days or so, Congress is slated to decide whether or not PNTR for China will be on America's commercial menu. Approval in the Senate seems likely. But House approval remains uncertain.

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