Robert A. Kapp
July - August 2000
Issue:
Cover by Benjamin A. Hurd
With prospects for the final escape from the Annual MFN/NTR Renewal convulsion looking better, we drive forward, with one eye on the rearview mirror
But the lessons of the recent PNTR campaign must not be forgotten, or we will confront very serious problems that foresight should be able to prevent.
Looking ahead
As the World Trade Organization (WTO) era begins for China, virtually every US firm doing business there will be attempting to grasp the new reali ties introduced by China's adherence to WTO codes and to the specific obligations the PRC undertook in its bilateral market-access agreements with the United States and other economies.
That means that companies will need to know, thoroughly and readily, the content of the WTO texts that affect their interests and the content of China's accession commitments; so will these US firms' Chinese counterparts, customers, suppliers, and competitors, as well as the Chinese government agencies that write and implement laws and regulations affecting foreign business in the PRC.
Business is correct in its assumption that WTO entry will impose upon China a process of change, linked to the achievement of WTO compatibility, which will permeate the Chinese economic and commercial environment. But even with the rigorous phase-in provisions of the US-China and EU-China bilateral agreements, what we cannot know in advance is exactly how, where, in what order, and how rapidly that change will occur in practice.
If past is prologue, we will see continuing uncertainties over matters of "interpretation." The possibility of early test cases, either before the multilateral WTO tribunal or within the Chinese decisionmaking apparatus itself, is very real. Even as the definitions of appropriate conduct under the WTO are better understood, the testing of the boundaries both by China and by its trade partners is highly likely. This should surprise no one, and indeed should be welcomed if it helps to establish and propagate a broader understanding of the stable parameters of the post-accession business environment.
At the same time, we are likely to find that the experiences and recommendations of international business, particularly of firms with more experience in the WTO environment or of firms in cutting-edge fields, will be helpful to China as it makes its way through uncharted territory, seeking to maximize the benefits of WTO participation while minimizing the domestic downsides. The US-China Business Council, for one, will seek to enhance the effectiveness of American business in working cooperatively with Chinese agencies in this regard.
American and other international companies will find that the WTO framework provides a guidebook to new opportunities, new ways of structuring and carrying out business activities, and new possibilities for resolving difficulties.
American companies will want to "know their rights" under the WTO, and they should be prepared to exercise those prerogatives when they need to.
But I believe that they will find increasingly that parties on the Chinese side are also ready to work under WTO-defined assumptions, and that over time the congruence of practice, vocabulary, and even definition of business goals will grow. I believe that, over time, the ancient problem of "same be d, different dreams," while never completely eliminated, will become less disruptive, as the norms and definitions embodied in the WTO take hold more and more widely in China. The process of mutual accommodation that has already taken China and international business so far from the 1978 starting point is likely to expand and accelerate, thanks to the sharing of WTO norms and assumptions.
Looking ahead, the US-China Business Council, and American business as a whole, will need to attend to at least four major jobs:
- Master the substance, in detail, of the WTO and its applications in the Chinese environment.
- Contribute our understandings and ideas to those in China willing to broaden the PRC internal dialogue on how best to develop China's economic future within the WTO framework, even when such Council contributions call for precious corporate resources of expertise and manpower.
- Expect and maximize change without demanding miracles. The process of experimentation is essentially permanent in China. Ironclad written codes, fully implemented and adhered to by all, are a distant dream in many areas. Age-old patterns of communication and influence will yield reluctantly to externally induced change. The "work in progress" quality of Chinese economic and social change will outlast us all.
- Encourage mutual exchange of insights and experiences, not onl y between Americans and Chinese, but among all members of the world business community engaged with China. The core principle of the WTO, non-discrimination, certainly does not envision the elimination of competition among companies and among national business communities, but it does mean that what one party gains can benefit everybody. No one expects companies to spill their innermost secrets to the world. But there is room for wider transnational cooperation in achieving the kinds of business environment improvements that China's WTO membership should facilitate.
Watching the rearview mirror
If the post-accession future calls for a redoubling of our attention to the changing Chinese business environment, it is not mere nostalgia to point out that establishment of PNTR, while an important milestone, provides sobering lessons regarding what has not changed in the United States.
The victory in the House of Representatives on PNTR should not obscure the following:
- A large core of virulent criticism of internal conditions in China is alive and well in the Congress and the media. The vituperation of the anti-PNTR rhetoric in the May 24 House debate should be a warning to us all, as was the power of the anti-PNTR assault from organized labor and the anti-globalization forces in American society. At least in negative terms, China is likely to continue to have "legs" in so me public-opinion and political circles. PNTR and WTO accession will not change that.
- On the other hand, final establishment of PNTR paradoxically deprives the forces supporting stability and civility in US-China relations of a clearly defined goal, a rallying point, toward which to devote their resources and energies. A campaign as intense and costly as the recent effort to win PNTR could not be sustained indefinitely anyway. But the subsidence of the colossal PNTR effort could leave a vacuum in the US public discourse and in US politics, which undeterred campaigners on the negative side will be all too ready to fill. The US business community must continue to play a crucial role in maintaining a balanced US domestic dialogue on China, for as far as the eye can see. Any default on that responsibility will have dire effects. If we do not deliver on this, no one will.
- The establishment of WTO-based economic relations between the US and China, amid continuing US public and political uneasiness over China itself, places American business operations in China more closely than ever under domestic US scrutiny. Some of the pro-PNTR rhetoric with regard to the "exporting of American values," while necessary to get a basic idea across to the uninformed during the PNTR campaign, stretched the limits of plausibility. What is clear, though, is that there can be no letup in the commitment of US firms t o the fullest realization of American ethical and social standards in their China operations. That is not proselytism; it is good business. But it is also critically important politically. PNTR will not insulate American business in China from damage back home if the record of constructive US business contributions to China's progress and social development does not constantly improve.
In short, WTO and PNTR will pose heavy new challenges for US companies working with China, and for the US-China Business Council as it works to assist and advise US firms on how best to realize the benefits and minimize the risks of China's historic WTO commitments. But WTO and PNTR do not mean for a minute that the array of forces that we have faced in the United States for years, and which fought against PNTR with such power and with so many resources, can now be consigned to history. While we navigate the minefields of a changing Chinese economic and social environment, we will remain active in the continuing American dialogue about China and ourselves, in a world that appears, to many Americans, to present more peril than promise.
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