Home | Subscribe | Index | Special Reports Order past issues | Table of Contents

Toward the Millennium

A range of new and old issues in US-China commercial relations awaits resolution in 1999

Robert A. Kapp

Here's a New Year's roundup of what we see ahead for 1999. Virtually nothing is for sure, of course; the world seems to be facing a wider array of short-term uncertainties this year than in the recent past. So, with due credit to the surprise factor in world financial circles, the ups and downs of domestic politics, the vagaries of structural reforms in China, here are some major "possibles" for 1999.

• Continued structural disagreements over China policy Acute differences of view between the executive and legislative branches of US government, between the parties (on some issues), and occasionally between the House and Senate, are likely. This is a new Congress, with some new leaders and certain familiar figures in new positions. A number of veterans of the China debates are shifting their focus to other congressional priorities; new figures are taking their places with only modest background on China issues. A period of sorting out of priorities is inevitable, during which China issues will need to be introduced and discussed quietly, even if they do not rise to top priority in a complex congressional environment.

• A national security debate in the United States Look for heated rhetoric and some pretty flamboyant charges and counter-charges, beginning early in 1999. Expect sensational media items based on unidentified sources or citing secret documents; on this, the past is almost certainly prologue. The catch phrase of the season will be the loosely bandied "ties to" and "links to"; when you see them, read skeptically. Brace for some broad and ill-focused assaults on US business with China. Congressional hearings and legislative measures directed at export-control policy, or trade with China, or both, are distinct possibilities. Long-running themes will likely resurface for new and fresh audiences, both over export-control processes (one of the great intra-bureaucratic holy wars of late 20th-century American life) and, importantly, over the degree to which corporate competitiveness and success in global markets is critical to US national security interests.

• Normal Trade Relations (NTR) Something will have to be done on NTR (formerly MFN) by June. Congress is tired of annual NTR; so is China; so is business. Brave souls in Congress have floated other ideas: permanent NTR (PNTR) with no strings, or permanent NTR upon China's World Trade Organization (WTO) accession with no later vote required on PNTR. So far, there is precious little sign that permanent NTR can fly without a WTO agreement; if WTO talks evaporate, look for proposals of other alternatives to the annual ritual, such as multi-year NTR renewal. That sounds better than nothing, but not if it is to be used as the lid on the WTO coffin. If by June we face annual NTR renewal simply for lack of anything more constructive, we must take nothing for granted and put forth the case for normal trade with undiminished energy.

• China and the WTO The fog is virtually impenetrable here. Ask 10 people "in the know" about prospects of US-China WTO agreement in 1999 and, after the usual platitudes about the "closing window of opportunity" (remember, some platitudes are true!), receive 10 different answers, many of them heavy with the scent of spin-doctoring. The most optimistic scenario would be a determined, successful push for a serious agreement capable of bringing unmistakable economic benefits to both countries, backed by the highest leadership of both countries, in time to replace annual NTR with permanent NTR; PNTR is required for the United States to benefit fully from China's WTO accession. Short of that, back rolls the fog. Failure to come to bilateral agreement in 1999, especially in the first half of the year, can only be regarded as a sobering policy disappointment, regardless of who wins the blaming battle that would inevitably follow.

• Trade disputes Observers differ starkly over whether, short of a WTO agreement, the United States and China are doomed to revert to the militant bilateral trade confrontations of the late 1980s and early 1990s. Some highly visible commentators opine that American trade actions under the famed "Section 301" provisions of US trade law are inevitable (such commentators also tend to recommend muscular unilateral action). Others say 301s are not in the cards. Some would argue that head-to-head trade battles driven by high-decibel threats of massive trade sanctions would pollute much of the broader US-China agenda, which includes critical cooperation on regional and global security issues and macroeconomic problems. Others respond that such headline-grabbing trade disputes have not prevented continuing US-China cooperation in other fields in the past. "One thing's for sure," as waffling commentators so often say: genuine progress on WTO is likely to be the best guarantee that smoldering matches do not ignite a general conflagration.

• A visit by PRC Premier Zhu Rongji It is no secret that a spring 1999 visit to the United States by Premier Zhu Rongji is under careful review in both countries. The visit should take place, and very likely will, barring monumental surprises. The visit of the head of the Chinese government to the United States would be a welcome continuation of the visit-driven advances achieved through the Jiang and Clinton state visits in 1997 and 1998. Moreover, Zhu Rongji's remarkable style of plain speaking has proven already to be particularly accessible to American listeners; the v isit would offer a chance for a genuine dialogue.

But the decision to schedule the trip is not a light matter; once the decision is set, derailment or diminution of the visit would be serious indeed. Expect some in the American political arena to take noisy aim at the visit, as happened in the lead-up to the two earlier summit meetings. Beyond that, the Zhu visit, if it occurs, must have content, and it must have economic and commercial substance. The content, in my view, needs to be structural in nature, not simply transactional. Creativity is required. Political and economic constraints notwithstanding, the Zhu visit should be the occasion for initiatives that promote important structural innovations in the ways the two countries conduct their commercial relations. Short of wholesale system change, which many consider improbable, there remains the often-used and convenient fig leaf of "experiments," test-case applications of new forms and new ways around old problems.

I welcome letters from CBR readers on the most promising and realistic structural initiatives to be pursued in the event that the Chinese premier visits the United States in the spring.

• Continued challenges to business development in China Though slow progress on some deep-structure problems that have long plagued foreign firms in the PRC will be made, PRC economic growth will likely continue to s low. Even though some recent onerous measures may turn out to be only temporary reactions to unexpected economic emergencies, they will continue to rankle in 1999; the US-China Business Council will be working to ensure that the immediate impact of such measures, and their probable long-term effects, are fully understood in Beijing.

• Year 2000 US companies are grappling with the implications of the Y2K problem for their operations worldwide. The level of their concern with regard to operations in China is high and rising. The more one comes face-to-face with this glitch in the world's technical systems, the more one realizes that the issue is also economic and even cultural in every country. Look for increasingly urgent efforts by US business to work with Chinese authorities on Y2K-related concerns, as all parties struggle to diagnose the extent of the malady and devise treatments in advance. Let's try to work together responsibly and patiently under trying conditions.

Welcome, then, to 1999. Welcome, new members of Congress and other newcomers to the world of US-China relations. We'll be seeing you often, I suspect, as we navigate through the mist this year.