Top Financial News
Wed, 24 May 2000, 7:01pm EDT
U.S. House Passes China Bill in Victory for Clinton (Update3)
By Heidi Przybyla
Washington, May 24 (Bloomberg) -- The U.S. House passed
legislation guaranteeing China access to the U.S. market,
rejecting a lobbying blitz by organized labor and handing
President Bill Clinton his biggest victory on trade in six years.
The bill granting China ``permanent normal trade relations``
was passed on a vote of 237-197, with 73 Democrats joining 164
Republicans in support of the bill. The legislation will be taken
up next in the Senate, where passage is likely.
``We should not isolate China nor should we in the United
States isolate ourselves from pressing China in the right
direction,`` said Michigan Democrat Sander Levin, who led the
effort to win Democratic support of the measure.
Clinton and scores of U.S. companies lobbied for months to
win support from members of Congress, while labor unions, human
rights advocates and environmental groups waged a furious campaign
against the legislation. That forced many House Democrats to
choose between alienating traditional constituents and crossing
business supporters before the November elections.
Enough of them chose to back Clinton and vote for the
legislation that will end the politically charged process of
annually reviewing China`s trade status and endorse Beijing`s
membership in the World Trade Organization.
In exchange, China will grant market concessions that will
benefit U.S. companies such as Motorola Inc., Worldcom Inc.,
Citigroup Inc., and Cargill Inc.
``We have seen Airbus make inroads (in China) because of the
political tension between the U.S. and China,`` Boeing Co.
spokesman Tim Neale said, referring to the European-owned airline
that competes with Seattle-based Boeing.
Boeing`s share of jet sales to China has dropped from more
than 80 percent to 66 percent in the past two years as China
purchased more jets from Airbus Industrie, Neale said.
Boeing expects China to purchase $120 billion in jets during
the next 20 years, making it the second largest market after the
U.S. Having a normal trading relationship with China should poise
Boeing to capture more of those purchases, said Neale.
China also agreed to let Boeing and other U.S. companies
import and export without using Chinese middlemen, a requirement
that in the past has made it difficult for companies to distribute
Supporters say the China legislation will help the U.S.
whittle away at the trade imbalance because China will lower its
tariffs on U.S. exports from an average 25 percent to about 9
percent by 2005 as part of the November U.S.-China agreement on
the terms of China`s WTO entry.
The most significant dividends could go to service providers
like Citigroup Inc., which have long complained they are unable to
enter the Chinese market.
China committed to open its insurance, banking,
telecommunications, travel and tourism, and other markets to U.S.
companies once the measure becomes law and China enters the WTO.
``For the first time, non-Chinese banks are going to be able
to do every kind of promotional and corporate banking activity in
China,`` said Michael Andrews, Citigroup vice president of
international business affairs.
More service business with China will help the U.S. trade
deficit with China, said Sandy Kristoff, New York Life Insurance
vice president of international government affairs.
``Services is what has kept this economy growing,`` she said.
``It is the U.S. services industry that has contributed the most
to holding the U.S. trade deficit numbers,`` she said.
China agreed to allow 49 percent foreign ownership in mobile
telecommunications and to open wider its group life, health and
pension insurance market to U.S. companies within three years
after it becomes a WTO member.
More Than Business
Throughout the six months of lobbying, though, Clinton argued
that the vote`s impact transcended business. He said China`s WTO
membership would tie it to a rules-based international system, and
that U.S. computers and cell phones would be the tools for
building a democracy in the world`s largest communist stronghold.
Yesterday, he cited support for China`s membership in the WTO
from the Dalai Lama, the Tibetan spiritual leader, Martin Lee, the
head of Hong Kong`s democracy movement, and Chen Shui-ban,
Taiwan`s new president.
Clinton praised the House action in a televised address
minutes after the vote. ``This is a good day for America, and 10
years from now, we will look back on this and be glad we did it,``
Labor leaders and their legislative allies charged that the
legislation strips the U.S. of any meaningful leverage to improve
Chinese practices, including recent crackdowns on the Falun Gong
spiritual group and the imprisonment of democracy advocates.
House Minority Leader Richard Gephardt called the annual
congressional reviews ``real pressure`` that will bring change to
China, adding, ``If we don`t lead, who will?``
Opponents also warn that U.S. manufacturers are planning to
shift factories to China to cash in on low-wage labor and export
the goods back to this country.
``We`re going to lose a massive amount of jobs here,`` said
Teamsters union President James Hoffa., Hoffa said. ``This is the
green light (U.S. companies) are waiting for.``
U.S. imports from China rose to a record $81.8 billion in
1999, a 15 percent increase from 1998, while U.S. exports to China
fell 7.9 percent to $13.1 billion in the same period.
Unions threatened to withhold support in the November
elections from Democrats who voted for the bill. The vote will
encourage union members to ``sit and do nothing as they did in
1994,`` after the passage of the North American Free Trade
Agreement, Richard Trumka, secretary-treasurer of the AFL-CIO
trade federation, said Sunday.
The threat may prove futile, however, because labor has no
real alternative. ``It probably won`t have a huge impact`` on
Democratic efforts to retake control of the House, said Vic
Kamber, a political consultant to organized labor. Union members
may be angry, but they are unlikely to back a Republican candidate
who is less likely to support their agenda in the next Congress,
Congress approved Nafta in 1993, then approved U.S.
membership in the World Trade Organization in 1994, Clinton`s last
big trade victory.
Opponents of the bill, led by House Minority Whip David
Bonior, say Congress voted to endorse the policies of a ``brutal
authoritarian police state,`` putting profits ahead of morals.
The current annual review system, which for the past two
decades has carried the threat of cutting off Chinese trading
rights, is the only way to promote change in China, they say.
``This is the only lever we have,`` said Hoffa.
Concerns over China`s human rights practices were so great
that supporters like Levin -- who comes from a district with a
heavy concentration of autoworkers -- risked labor`s wrath by
devising side legislation to win more Democratic votes.
The AFL-CIO denounced Levin`s measure -- which maintains an
annual review of China`s human rights practices without the threat
of sanctions -- as ``toothless.``
Still, the White House says the current system isn`t working,
as evidenced by a recent State Department report showing human
rights abuses in China are worsening.