China's WTO Debut
The tentative trade agreement forged over the weekend between China and the United States is likely to pave the way for China's entry into the World Trade Organization, but not without lots of gnashing of teeth and shedding of political blood beforehand.The deal, on the basis of preliminary information, opens up market opportunities for U.S. high-technology and business consulting firms as well as American agriculture on terms that appear slightly improved from those the Clinton administration rejected last spring. With those concessions in hand, the Clinton administration can more easily ask Congress to OK China's entry into the WTO, thereby granting China the equivalent of permanent "most favored nation" (MFN) status.Most business groups applauded the deal and the prospect of China entering the WTO. Peter Morici, senior fellow at the Economic Strategy Institute, a think tank that promotes the interest of American export firms, argued that the trade deal "should create many more opportunities for Americans than for Chinese," especially in high technology, logistics, software, business and legal consulting, and telecommunications services.Labor unions, however, denounced the deal in especially harsh terms. AFL-CIO president John Sweeney attacked the Clinton administration as "disgustingly hypocritical" and as making a "grave mistake" in its "fevered rush" for a deal with China. Sweeney's lambasting of the administration comes just weeks after Clinton and Gore lobbied aggressively to secure an early endorsement for Gore's presidential campaign, and could potentially cause headaches for the vice president in getting the union rank and file to mobilize on his behalf."At a time when WTO rules protecting workers' and human rights and the environment are yet unwritten, this agreement undermines that possibility and squanders a chance for the WTO to achieve the legitimacy it and other international institutions lack among people around the world," Sweeney said."There could be a big trade fight in this country over this, bigger than NAFTA," said Mark Levinson, chief economist for Union of Needletrades, Industrial and Textile Employees (UNITE). "It's outrageous. It shows the administration doesn't take workers' rights seriously."Even though Gore, Bradley and Bush all support deregulation of international trade, Gore's direct link with Clinton may cost him votes among union and working-class voters, votes that may be crucial in a competitive Democratic primary.Even if Gore survives a challenge from former Sen. Bill Bradley, there is a precedent for trade deals negotiated by Clinton translating into Republican victories at the ballot box. In the Republican landslide of 1994 many "blue-collar" voters who would typically have supported Democrats simply stayed home, in part because of disillusionment with Democratic support for NAFTA.The deal comes as Sweeney is under growing pressure from industrial unions to show that he understands their concerns about deregulated trade. There was a mini-rebellion in the ranks when the AFL-CIO president joined business executives on a trade advisory panel in supporting the administration's strategy for the WTO meetings coming up at the end of the month in Seattle, including the formation of a "working party" to discuss protecting worker rights at the WTO.That deal, which left many industrial union leaders angry, now looks especially hollow and leaves Sweeney politically vulnerable unless he takes the administration to task on its China policies. With the admission of China to the WTO, it would be much more difficult to make even the slightest headway toward linking trade privileges and protection of internationally recognized worker rights.The administration acknowledges that some U.S. industries -- such as apparel and textiles -- will lose many jobs to Chinese imports, but the United States market is already open to many other Chinese products and last year ran a $57 billion trade deficit with China. Although the new trade deal may open business and financial service markets to American companies, unions and other free-trade skeptics doubt the forecasts of a China export boom that will diminish the deficit and gain jobs for the United States. After all, Levinson argues, the administration used similar models in evaluating NAFTA and was far off the mark.Imports from Mexico were eight times greater in just the first five years of NAFTA than the International Trade Commission had projected for the "long term." The administration negotiated provisions to protect against surges of Chinese import in certain industries and to eliminate export subsidies, but labor argues that China's suppression of worker rights to organize and bargain for higher wages allows them to produce cheap products and gives them an unfair market advantage, which will lead to the loss of American jobs.Even more than trade deficits and job losses, organized labor is worried that China's entry into the WTO will stifle any progress on defending workers' rights around the world. Competition from China is likely to encourage governments in other poor, developing countries to suppress worker rights and hold down wages. The poorer countries of Asia may face the biggest immediate short-term job threat when the WTO admits China, which is expected to capture much of the export-oriented garment, textile and shoe business from other countries in Asia when the global agreement on quotas on "fiber" products expires in five years.The repercussions of the trade deal and China's entry into the WTO could go far beyond what most people think of as "trade." New foreign competition could hasten the loss of jobs in China's large state industries, throwing millions of workers into the streets, depressing wages further and creating social turmoil. As cheap Western grains flood Chinese markets, many millions more peasants may be forced off the land into the cities. As China opens up to international investment, banks and financial services firms, it will lose some of the control over its economy that helped it avoid the worst of the Asian financial crisis of recent years.Analysts like Morici argue that membership in the WTO will "further lessen the grip" of the Chinese government over the economy and eventually lead to improved conditions on human-rights issues. But the United Nations Development Program reported earlier this year that rapid economic liberalization in developing countries has been associated with huge increases in inequality, and does not necessarily lead to improvements of human rights.