The Progressive ResponseVolume 4, Number 21
Editor: Tom Barry (IRC)
Table of ContentsI. Updates and Out-TakesCHINA TRADE ISSUE: VERY MUCH LIKE NAFTA NORMAL TRADE STATUS FOR CHINA DANGEROUS LIAISONS: PROGRESSIVES, THE RIGHT,
AND THE ANTI-CHINA TRADE CAMPAIGN
II. Letters
I. Updates and Out-Takes
CHINA TRADE ISSUE: VERY MUCH
LIKE NAFTA First, we should be very honest about the disagreement over the process of admitting China to the WTO and the process of approving or disapproving permanent normal trade relations. It's actually very much like NAFTA. It wasn't because we were against Mexico in any way. We just knew that the purpose of this agreement was to accelerate the process of downward harmonization of wages and living standards and environmental standards. It was very clear from the nature of the agreement that it would do this. I don't really see how this is that different. So I think it is unfortunate that so much of the debate has been shifted to human rights and to a demonization of China and other issues where we have much weaker arguments. I think we're much stronger on the economic arguments. We're winning, by the way. Let me give you some evidence of this. In Sunday's New York Times, there was a piece by Joseph Kahn, their international economics correspondent, who said that Stanley Fischer, number two at the IMF, says world leaders will have to come up with another way of describing economic integration. You can't use the word globalization any more if the idea is ever to become popular. Lawrence Summers, Treasury Secretary, delivered a long address on world development policy in the Press Club last week, without so much as mentioning the term. Then there are the polls: 68 percent of people here believe that our agreements with low-wage countries drive wages down in the United States. When asked what they think are the most important things to have in these agreements, they list protecting jobs--which never even comes up in the debate--and the environment, as number one and number two. By large majorities. So we're clearly winning the debate as never before. As a matter of fact, when asked how they identify themselves, the majority--actually, 51 percent--said fair traders; some small percentage said free traders, 10 percent or something; and 37 percent called themselves protectionist--a word that is only used as a pejorative in the mainstream media, which has really reached the level of "communist" in terms of its value. Fair trader is really only used by the progressive community and the labor movement. So clearly we have the majority of the population on our side, for a very good reason. Let's look at the United States. The median wage today is the same as it was 26 years ago, maybe even a little less in terms of its purchasing power. That means literally that the majority of the labor force has not shared in the gains from economic growth of over a quarter of a century. And there's agreement among economists, even those who are pro-globalization, that the opening up of our economy has had a significant part of the impact. Although there is disagreement as to how much. William Cline of the Institute for International Economics has estimated that 39 percent of the inequality in wages since 1973 to 1993 was the result of just trade. And of course that doesn't include the major impact of NAFTA and our relations with China, as "investors." That is the consolidation of the ability of U.S. corporations to go to these countries to produce their products, and then export them back to the United States. We can state plainly to the American people that we want a new deal. Until we get the new deal, there should be no more opening up to trade or investment, and no more commercial agreements. The burden of proof has been shifted. It's on them. If they can't show how people in the United States are going to gain from it, then we don't want it. I don't really see that there's any apology to be made for that whatsoever. Now I imagine a special case could come up; but certainly not with China, which is a large country and has one of the fastest growth rates in the world, and is perfectly capable of taking care of itself. As a matter of fact, that's another reason why I don't like the China bashing. because China was able to weather the Asian financial crisis better than anyone else. It had a 7.8 percent growth rate in 1998, and something around seven in 1999. While the regional economy was going through recession and depression in countries like Indonesia, they were able to avoid that because they don't have a convertible currency, they don't have significant foreign ownership of equities, and they have state control over the banking system. I'm not holding any of this up as a model, because even the fixed exchange rate doesn't work in every case. A lot of countries are better off with a flexible exchange rate--it really depends on the country. But it is the only sizeable country in the world that has the degree of national economic sovereignty to actually make these decisions itself. Ironically, the rest of world benefited from their ability to avoid A) the prescriptions from the IMF and Treasury that caused the Asian financial crisis, and B) the prescription that made it worse-the unnecessary austerity policies, and the beggar-thy-neighbor export policies. China also avoided devaluing its own currency and accelerating another round, because it was able to choose its own economic policies. China chose, among other things, to implement a $200 billion public works project to stimulate its own economy. So that was a proper response to a contracting regional economy. On all those grounds, I don't think we have that much to worry about on China's side. I know the administration is using more and more political arguments to justify this agreement, but let's face it. We all know it's about money. They're there to get into the telecommunications and the financial services markets. It's going to have a negative impact on China as well. I think there's no doubt about that. And you see divisions within China. You see opposition there. It's more difficult than to oppose the agreement here. But it's not in the interests of the majority of people there either. So I really don't see any apologies that we need to make in this case. (Mark Weisbrot <weisbrot@cepr.net> is Co-Director of the Center for Economic and Policy Research.)
NORMAL TRADE STATUS FOR CHINA PNTR for China Comments presented May 10, 2000 Institute for Policy Studies, Washington, D.C. What I think we agree upon:
Why PNTR for China? Advocating PNTR for China does not mean one believes all the ludicrous claims made by international capital--such as that PNTR and WTO membership will automatically lead to greater respect for human rights, democracy or other forms of manna from heaven. I argue that in three main areas of concern for progressives: security, globalization, and the environment--supporting PNTR is an appropriate stance. Security--Progressives have at least three interests in this area:
Supporting PNTR advances all those objectives, while denying it works against those objectives:
Opposing PNTR places the U.S. out of step with the rest of the world. The U.S. is the only major country that does not afford the People's Republic of China permanent NTR. Of the WTO's 136 members, 37 have expressed an interest in negotiating market access in goods and services. China has concluded accords with 30. Today, China's major concerns involve dealing with massive economic and political transformations--transformations that will only become more dramatic if China enters the WTO and meets its commitments under the various agreements it signs with the Quad powers. In such a context, an aggressive U.S. posture strengthens the hardliners within China's security apparatus that argue the U.S. is trying isolate and contain China. A better strategy would recognize the longer-term strategic benefits of enmeshing the U.S. and China within multilateral institutions. China's WTO membership and PNTR status would facilitate such steps. U.S. as Gatekeeper There is now a vibrant debate over the social clause in all its proposed permutations, a debate advanced by progressive anti-PNTR advocates. But one argument presented by some prominent progressive opponents of PNTR is that China should be excluded from the WTO because reforming the WTO with China in it will be more difficult due to China's opposition to linking labor rights and environmental standards with trade. But this opposition is not unique to China--it is shared by democratic India and semi-authoritarian Indonesia as well as a range of other countries. I find this argument difficult to understand. In the name of greater accountability and reform, we should exclude the country with one sixth of the world's population. It is outrageous to say that China should not be able to participate in that debate at the WTO. Even if one's objective is to abolish the WTO, using China as a proxy for doing so is unprincipled. If the goal is abolishing the WTO, then campaign to get the U.S. to withdraw from the WTO. Normal Trade Relations is not like NAFTA The PNTR debate is not the same as the NAFTA, CBI/AGOA, and FTAA battles. First, there were clear alternatives in those campaigns supported by civil society organizations of the countries involved. U.S. activists were not "speaking" in the name of, in this case, Chinese workers and peasants. Second, those neoliberal efforts were about trade preferences and not about NTR, which is widely seen as a basic part of "citizenship" in the world economy. As Martin Khor and others have argued in the case of GSP, for example, it is legitimate for the U.S. to exercise unilateralism in the context of trade preferences. But, if it is going to link human worker rights and environmental standards to NTR, it should be done in a multilateral framework where all affected parties can negotiate. Third, the only time that progressive internationalists have argued for differential treatment (i.e., double standards) for a country was when liberation movements called on the international community to do so, such as in Burma and apartheid-era South Africa. The PNTR campaign meets none of those conditions. Environment China will be critical to resolving some of the major global environmental challenges such as ozone and climate change. Its poor performance on some MEAs, particularly CITES, is a major concern. Under China's accession to the WTO there will no doubt be an increase in resource-based and pollution-intensive commodities, because world prices typically do not internalize social and environmental costs. The World Bank estimates that the current level of pollution costs China 8% of GNP in damage to life, health, and property. But it is troubling that environmental organizations would campaign to use unilateral annual trade reviews as a mechanism for improving China's compliance with its environmental commitments. Rejecting PNTR will do nothing to address these concerns, and the annual trade reviews under Jackson-Vanik have done nothing to leverage those goals. According to environmental economist Theodore Panayotou: "China has paid more attention to the environment, has employed conventional instruments of environmental policy more creatively and has experimented with more novel economic incentives (e.g. tradable pollution permits) than any other large country at a comparable level of development (e.g., India or Indonesia)."
If we want the U.S. government to support improved environmental performance in China, then let's also try some carrots, much as we have in the area of child labor elsewhere. In contrast to Japan, which provided $1.8 billion from 1988-1995 for environmental projects, U.S. support is anemic, largely through small, under-funded technical assistance initiatives under the auspices of the EPA. China is not eligible for funding from USAID and is excluded from participating in the U.S.-Asia Environmental Partnership. (John Gershman, <jgershman@igc.org> of the Institute for Development Research, is also the Foreign Policy In Focus Asia-Pacific Editor.)
DANGEROUS LIAISONS: PROGRESSIVES,
THE RIGHT, AND THE ANTI-CHINA TRADE CAMPAIGN Organized labor is at the center of a motley coalition that is against granting PNTR to China. This coalition includes right wing groups and personalities like Pat Buchanan, the old anti-China lobby linked to the anti-communist Kuomintang Party in Taiwan, protectionist U.S. business groups, and some environmentalist, human rights, and citizens' rights groups. The intention of this right-left coalition is to be able to use trade sanctions to influence China's economic and political behavior as well as to make it difficult for China to enter the WTO. There are fundamental problems with the position of this alliance, many of whose members are, without doubt, acting out of the best intentions. First of all, the anti-China trade campaign is essentially another manifestation of American unilateralism. Like many in the anti-PNTR coalition, we do not uphold the free-trade paradigm that underpins the NTR. Like many of them, we do not think that China will benefit from WTO membership. But what is at issue here is not the desirability or non-desirability of the free trade paradigm and the WTO in advancing people's welfare. What is at issue here is Washington's unilateral moves to determine who is to be a legitimate member of the international economic community--in this case, who is qualified to join and enjoy full membership rights in the WTO. This decision of whether or not China can join the WTO is one that must be determined by China and the 137 member-countries of the WTO, without one power exercising effective veto power over this process. To subject this process to a special bilateral agreement with the United States that is highly conditional on the acceding country's future behavior falls smack into the tradition of unilateralism. One reason the anti-China trade campaign is particularly disturbing is that it comes on the heels of a series of recent unilateralist acts, the most prominent of which have been Washington's cruise missile attacks on alleged terrorist targets in the Sudan and Afghanistan in August 1998, its bombing of Iraq in December 1998, and the U.S.-instigated 12-week NATO bombardment of Kosovo in 1999. In all three cases, the U.S. refused to seek UN sanction or approval but chose to act without international legal restraints. Serving as the gatekeeper for China's integration into the global economic community is the economic correlate of Washington's military unilateralism. Second, the anti-China trade campaign reeks of double standards. A great number of countries would be deprived of PNTR status were the same standards sought from China applied to them, including Singapore (where government controls the labor movement), Mexico (where labor is also under the thumb of government), Saudi Arabia and the Gulf states (where women are systematically relegated by law and custom to second-class status as citizens), Pakistan (where a military dictatorship reigns), Brunei (where democratic rights are non-existent), to name just a few U.S. allies. What is the logic and moral basis for singling out China when there are scores of other regimes that are, in fact, so much more insensitive to the political, economic, and social needs of their citizenries? Third, the campaign is marked by what the great Senator J. William Fulbright denounced as the dark side of the American spirit that led to the Vietnam debacle--that is, "the morality of absolute self-assurance fired by the crusading spirit." It draws emotional energy not so much from genuine concerns for human and democratic rights in China but from the knee-jerk emotional ensemble of anti-communism that continues to plague the U.S. public despite the end of the Cold War. When one progressive organizer says that non-passage of the PNTR would inflict defeat on "the brutal, arrogant, corrupt, autocratic, and oligarchic regime in Beijing," the strong language is not unintentional: it is meant to hit the old Cold War buttons to mobilize the old anti-communist, conservative constituency, in the hope of building a right-left populist base that could--somehow--be directed at "progressive" ends. Fourth, the anti-China trade campaign is intensely hypocritical. As many critics of the campaign have pointed out, the moral right of the U.S. to deny permanent normal trading rights to China on social and environmental grounds is simply nonexistent given its record: the largest prison population in the world, the most state-sponsored executions of any country in the world, the highest income disparities among industrialized countries, the world's biggest emitter of greenhouse gases, and quasi-slavery conditions for farm workers. Fifth, the anti-China trade campaign is intellectually flawed. The issue of labor control in China lies at the core of the campaign, which blames China's government for the low wages that produce the very competitively priced goods that are said to contribute to displacing U.S. industries and workers. This is plain wrong: the relatively low wages in China stem less from wage repression than from the dynamics of economic development. Widespread poverty or low economic growth are the main reasons for the low wages in developing countries. Were the state of unionism the central determinant of wage levels, as the AFL-CIO claims, labor costs in authoritarian China and democratic India, with its formally free trade union movement, would not be equal, as they, in fact, are. Similarly, it is mainly the process of economic growth--the dynamic interaction between the growing productivity of labor, the reduction of the wage-depressing surplus of rural labor, and rising profits--that triggers the rapid rise in wage levels in an economy, as shown in the case of Taiwan, Korea, and Singapore, which had no independent unions and where strikes were illegal during their periods of rapid development. Saying that the dynamics of development rather than the state of labor organizing is by far the greatest determinant of wage levels is not to say that the organization of labor is inconsequential. Successful organizing has gotten workers a higher level of wages than would be possible were it only the dynamics of economic development that were at work. It is not to argue that labor organizing is not desirable in developing economies. Of course, it is not only desirable but necessary, so that workers can keep more of the value of production for themselves, reduce their exploitation by transnational and state capitalist elites, and gain more control over their conditions of work. Sixth, the anti-China trade campaign is dishonest. It invokes concern about the rights of Chinese workers and the rights of the Chinese people, but its main objective is to protect American jobs against cheap imports from China. This is cloaking self-interest with altruistic rhetoric. What the campaign should be doing is openly acknowledging that its overriding goal is to protect jobs, which is a legitimate concern and goal. And what it should be working for is not invoking sanctions on human rights grounds, but working out solutions such as managed trade, which would seek to balance the need of American workers to protect their jobs while allowing the market access that allows workers in other countries to keep their jobs, and their countries to sustain a certain level of growth while they move to change their development model. Instead, what the rhetoric of the anti-China trade campaign does is debase human rights and democratic rights language with its hypocrisy, while delegitimizing the objective of protecting jobs--which is a central social and economic right--by concealing it. Seventh, the anti-China trade campaign is a classic case of blaming the victim. China is not the enemy. Indeed, it is a prisoner of a global system of rules and institutions that allows transnational corporations to take advantage of the differential wage levels of counties at different levels of development to increase their profits, destabilize the global environment by generalizing an export-oriented, high-consumption model of development, and concentrate global income in fewer and fewer hands. Not granting China PNTR will not affect the functioning of this global system. Not giving China normal trading and investment rights will not harm transnational corporations; they will simply take more seriously the option of moving to Indonesia, Mauritius, or Mexico, where their ability to exact concessions is greater than in China, which can stand up to foreign interests far better than the weak governments of these countries. The anti-PNTR coalition is an alliance born of opportunism. In its effort to block imports from China, the AFL-CIO is courting the more conservative sectors of the U.S. population, including the Buchananite right wing, by stirring the old Cold War rhetoric. Nothing could be a more repellent image of this sordid project than John Sweeney, James Hoffa, President of the Teamsters, and Pat Buchanan holding hands in the anti-China trade rally on April 12, 2000, with Buchanan promising to make Hoffa his top negotiator of trade, if he won the race for president. Some environmental groups and citizens groups which have long but unsuccessfully courted labor, have, in turn, endorsed the campaign because they see it as the perfect opportunity to build bridges to the AFL-CIO. What we have, as a result, is an alliance built on the assertion of U.S. unilateralism rather than on the cornerstone of fundamental shared goals of solidarity, equity, and environmental integrity. This is not a progressive alliance but a right-wing populist alliance in the tradition of the anti-communist Big Government-Big Capital-Big Labor alliance during the Cold War--the labor-capital alliance in the West that produced the Exclusion and Anti-Miscegenation Acts against Chinese, Japanese, and Filipino workers in the late 19th and early 20th centuries, and, more recently, the populist movement that has supported the tightening of racist immigration laws by emphasizing the divide between workers who are citizens and workers who are not, with the latter being deprived of basic political rights. It is a policy that will, moreover, feed global instability by lending support to the efforts of the U.S. right and the Pentagon to demonize China as The Enemy and resurrect Containment as America's Grand Strategy, this time with China instead of the Soviet Union as the foe in a paradigm designed to advance American strategic hegemony. As in every other instance of unprincipled unity between the right and some sectors of the progressive movement, progressives will find that it will be the right that will walk away with the movement while they will be left with not even their principles. It is time to move away from this terribly misguided effort to derail the progressive movement by demonizing China, and to bring us all back to the spirit of Seattle as a movement of citizens of the world against corporate-led globalization and for genuine international cooperation. (Entire essay is posted at: http://www.foodfirst.org/media/opeds/2000/5-china.html) (Walden Bello <waldenbello@hotmail.com> is executive director of Focus on the Global South, a program of research, analysis, and capacity building based in Bangkok; Anuradha Mittal <amittal@foodfirst.org> is co-director of the Oakland-based Institute for Food and Development Policy, better known as Food First. We would like to thank Nicola Bullard, Peter Rosset, and Sal Glynn for their invaluable advice and assistance.)
II. Letters and CommentsPlease allow me to respond to Rob Scott's contention [in Progressive Response, May 12, at http://www.fpif.org/progresp/vol4/prog4n20.html] that I "simply made up" his conclusions to his May 1999 piece entitled "China Can Wait."[posted at http://www.epnnet.org/] I most humbly disagree. (All page references below are to his piece.) The relevant sections from my paper [http://www.fpif.org/papers/china/index.html] read as follows: "Robert Scott of the Economic Policy Institute presents arguments that combine many of the opposition positions in a way that is more identifiably nationalist than progressive, contending that 'China can wait' to enter the WTO because the Chinese government violates labor rights, China is a non-market economy, and Beijing pursues 'market-distorting government policies, including requirements for technology transfer to domestic firms, local content and offset requirements.' "Essentially, he criticizes China for not being sufficiently laissez faire (i.e., not looking like the U.S. economy) and calls for the elimination of the very policies that have been central to the relatively successful development strategies of several Asian countries. These policies, including the strategic use of protectionism, active state regulation of foreign investment, and significant government direction of the financial sector, were all key components of the relatively rapid growth achieved by Japan, Taiwan, and Korea in the postwar era and have been central to China's high-speed growth in the 1980s and 1990s." Scott's contention is that my characterization of his argument in the sentence that begins "Essentially..." is manufactured. While it is true that Scott never uses those exact words, I contend that my paraphrase is an accurate reflection of his argument. As Marcus Aurelius noted in his Meditations, "Look to the essence of a thing, whether it be a point of doctrine, of practice, or of interpretation." Scott opposes China's entry into the WTO because it is protectionist and because of its repression of labor (which I also mention in the paper). The core of Scott's argument is that China's success in certain sectors is due in large part to "market-distorting government policies" (p.5). The only reference point as to what could be a non-market distorting policy in the paper is apparently the United States. This is a common theme in the paper: highlighting what is wrong with China's economic policies compared with U.S. economic policies. When we look at his argument regarding possible problems if China joins the WTO and at the causes of the U.S. trade deficit with China, we see this meaning clearly. Scott argues that a major U.S. problem is that once China joins the WTO it will no longer be able to treat China as a non-market economy and utilize particular bilateral trade policies that apply to such economies (pp. 5-6). Again, the focus is on China's policies, not acknowledging that there are also major problems with U.S. international economic policies and with the structure of the U.S. economy. (A side note is that a recent report of the International Finance Corporation leaked to the Financial Times [MAY 11, 2000, P. 1] indicates that China's economy has already transformed significantly, with 33% of GDP in 1998 accounted for by private business, 37% by the state sector, and the remainder provided by agriculture and various hybrid forms of semi-state, semi-private ownership.) Scott argues that "[U.S.] trade imbalances with China reflect several underlying structural problems." (p. 6). These include: a general pattern of export-led growth that involves protection of domestic industries and nurturing targeted industrial sectors like motor vehicles and aircraft; its use of import requirements and offset agreements to compel firms that wish to gain access to China's market to transfer production and access to critical technologies to Chinese firms; and the dominant role played by China's state enterprises and the power of the state and of leading government officials in limiting market access and restricting access to foreign exchange. This last "unique structure explains," according to Scott, "China's pattern of repeated violation of international trade agreements and MOUs (Memorandum of Understanding)." Most readers will recognize these "structural problems" as key elements of China's developmental state. The fact that Scott sees these elements as the structural problems of the trade deficits (and not having anything to do with the structure of the U.S. economy) points to his view that the key obstacles to reducing the trade deficits are the responsibility of the Chinese state. Furthermore, the fact that he links the dominant role of state enterprises and the power of the state and of leading government officials to China's repeated violation of international trade agreements suggests to me that he wants to break that structural condition (otherwise, given the logic of the argument, how can you have an agreement with China that you can believe won't be violated?). Obtaining agreements that won't be violated (as I read his argument) therefore, requires the reshaping of policies that give state enterprises such dominance in the economy and the reversal of policies that give the state and leading government officials such authority in limiting market access and restricting access to foreign exchange. That sure looks like the "elimination of the very policies that have been central to the relatively successful development strategies of several Asian countries," as I argued in my critique. In short, Scott criticizes China for pursuing the kind of development strategy and policies that have become associated with the "developmental state" that many progressives think makes sense for most of the global South. Finally, at no time does Scott argue that the costs from liberalization in China that would be due to any accession agreement with the WTO would involve significant hardship for Chinese workers. Rather, the continual emphasis is on ensuring China's compliance with an agreement. It is hard to read any other conclusion other than that Scott desires a rolling back of China's developmental state in order to address both what he identifies as the structural causes of the U.S. trade deficits with China as well as the institutional conditions that promote what he identifies as repeated violation of trade agreements. I encourage people to read Scott's piece to draw their own conclusions. - John Gershman <jgershman@igc.org>
I want to commend you for an excellent summary on the China Trade issue, but also to express my serious concerns that as usual, we only read men's perspectives (and only white men??). Please be more thorough in your "progressive" summaries and include a greater diversity of comments from experts--there are certainly plenty of women experts who could make excellent comments. - Margaret Thompson, Associate Professor, University of Denver <margieratt@yahoo.com>
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