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Resources
Conference report:
"China, Russia, and the United States: Partners or Competitors?"
Acrobat PDF

Common Ground
radio program(s):
"China's Security and Economic Interests"
Transcript
RealAudio

The stage is set for yet another potentially rocky period in the US relationship with China. Relations have improved since the United States granted permanent normal trade relations (PNTR) status to China which cleared the way for China to enter the World Trade Organization (WTO).

This breakthrough, however, also contains the seeds of possible new economic and trade disputes between Beijing and Washington, DC, according to a group of China specialists convened by the Stanley Foundation.

According to these specialists, several key issues could fuel a backlash in the United States against improved trade relations with China. These include the rising trade deficit, rising US unemployment, and foot-dragging by China over compliance with the terms of the WTO. This could lead to disputes with the United States and rising discontent among those parts of the economy most affected.

A Growing Trade Deficit
There has been a dramatic rise in the US trade deficit with China. One specialist at the Stanley Foundation event calculated that the deficit, which was $17.8 billion in 1989, would soar to $80 billion in 2000. It is anticipated that China will join the WTO in 2001, which is predicted to lead to a further increase in the deficit. With US-China relations already strained by a number of foreign and security policy disagreements, a majority of the participants felt the larger trade imbalance would be politically damaging.

The Link to US Unemployment
Some specialists argued that a backlash against China might occur if the American public thinks the downturn in the US economy and growing unemployment is caused, in part, by China's WTO entry. As one group member said, "If WTO accession requires that China create 20 million new jobs a year, we're in trouble."

China and the WTO
China's history, bureaucracy, legal system, leadership, and social problems will make it very difficult for China to comply with all the terms and regulations required of WTO members. The specialists called this "one of the most critical flash points" on the horizon.

Domestic Politics
The debate in the US Congress over PNTR highlighted the unrealistically high expectations many in the United States have for the mutual economic benefits of China's entry into the WTO. Conference participants did not predict much change in US policy toward China, but felt that friction between the countries is likely to grow when American expectations are not met.

These China specialists—including human rights activists, trade lobbyists, journalists, business people, and scholars—met last fall as part of the Stanley Foundation's 41st annual Strategy for Peace Conference. The group went on to discuss a number of policy options which could help avoid or minimize these areas of potential conflict between the United States and China.

Leveling the Playing Field for US Business
There are things the US government can do to make it easier for US companies to trade and invest in China. One suggestion from conference participants is that the United States find new ways to provide trade assistance to China. US law, created in response to the 1989 Tiananmen Square incident, currently makes such help difficult.

The United States could also help China draft antimonopoly laws that would protect both Chinese and American businesses. The United States could help China improve its current tax collection system. This would help level the playing field for all businesses in China and generate more government revenues. Encouraging freedom of information in China could also have great benefits for business.

Leveling the Playing Field for Chinese and US Workers
Conference participants suggested that the US Congress should consider helping US workers who are displaced by increased trade with China. For Chinese workers, the United States should continue pressuring China on its human rights and labor record. "Just as greater market access to China for American businesses is needed, greater access for nongovernmental organizations—such as human rights groups, labor organizations, and churches—should also be encouraged," according to the report generated after the conference.

China is struggling to provide pension relief to retirees. US officials and money managers could provide assistance to China's social security system.

Providing Comprehensive Support for the Rule of Law
Many specialists proposed that the United States could provide money and technical support to promote systemic legal change in China. They warned, however, that US support for the rule of law in China should not be limited to enforcing just those laws required to carry out the WTO agreement.

The United States should work with China to develop "public interest law," which allows the government to be held accountable for its actions. "The Chinese government is already...allowing legal aid clinics to exist independently. The United States should also offer support in this area. Legal aid for China's poorest citizens is a means to address human rights and labor concerns," said the report.

These recommendations are intended by the conference participants to address the potential "flash points" they identified in US-China trade relations. These steps could improve the prospects for a smooth transition as China enters the WTO and the American and Chinese economies enter new eras.