The Bad News on Trade With China

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The China trade deal is an historic breakthrough to be sure, but that doesn't mean it justifies the current giddy optimism over what it will mean for the Chinese people or for relations between Beijing and Washington. The Senate's ratification Tuesday of permanent normal trading-partner status for China "will dim the role of government in people's daily lives and strengthen those within China to fight for higher labor standards, a cleaner environment, for human rights, for rule of law," gushed President Clinton. But anyone who's been paying attention to conditions in China over the past couple of years won't be holding their breath.

In order to gain access to the World Trade Organization and improve the prospects for its exports, China has agreed to far-reaching liberalization measures in its economy — but for the U.S. to enjoy the benefits of those changes, it had to end the annual practice of making trade relations with China contingent upon a congressional review of Beijing's political and human rights record. Now that both the Senate and the House have voted to do just that, President Clinton will sign the legislation and open a new era in relations with Beijing. But that new era will hardly be free of conflict — quite the contrary.

Despite more than two decades of trade with the U.S., China remains an authoritarian state ruled by an all-powerful Communist party. And there's a furious struggle at the very top of that party over China's economic and political direction — a struggle in which hard-liners obsessed with maintaining order are currently dominant. Arch- reformer prime minister Zhu Rongji had hoped to use the conditions attached to WTO membership as a whip with which to dramatically accelerate the pace of economic reform, but Zhu has been increasingly marginalized over the past 18 months, particularly after President Clinton backed out of concluding a permanent trade agreement last April at the height of the furor over allegations of Chinese nuclear espionage.

The overriding priority for Beijing's leadership is maintaining order and social control, and liberalizing the economy will necessarily bring unemployment and uncertainty to millions of ordinary Chinese, raising the specter of massive social unrest that could potentially tear China apart. The depth of that fear among the leadership was evident in last year's crackdown on the apparently harmless Falun Gong religious sect, and it will almost certainly act as a brake on Beijing's implementing the economic liberalization measures to which it has agreed. So while the Senate vote ends the annual unpleasantness between Beijing and Washington when Congress would rattle its saber at China before dutifully extending normal trade status for another year, it opens what promises to be a new era of conflict over the terms of trade.

The U.S. can't disengage from China, from which it imported some $80 billion in consumer products last year alone. But as with trade relations with Japan in the '80s, Washington may well find itself continually at loggerheads with Beijing over the rules that govern its economy. In what may be the ultimate sign of China's transition from communism to an authoritarian capitalism, the annual political showdown with Beijing may be finally eclipsed by that most capitalist of geopolitical conflicts — trade warfare.