- The Washington Times - Thursday, September 21, 2000

Tuesday's Senate vote on a bill to expand trade with China is the beginning of the U.S. effort to break into a vast market of 1.3 billion people, a task that will take years to bring benefits to American workers and consumers.

Chinese companies, rather than their American counterparts, are more likely to see quick results from the agreements in one area, clothing exports. U.S. workers and consumers, in contrast, will see the benefits of this agreement only slowly and incrementally as it is phased in over several years, albeit across many industries.

"It is going to take a while to reap the benefits so confidently predicted in congressional debates," said Greg Mastel, a trade specialist at the District of Columbia-based New American Foundation.

And extracting the full value of the U.S.-China trade agreement, business and government officials say, will bring complicated disputes, heated rhetoric and, at least in the short term, a higher trade deficit with China.

"Certainly there will be conflicts. Certainly there will be disagreements," U.S. Trade Representative Charlene Barshefsky said. "We're going to have to be hard-nosed."

Following the lead of the House, the Senate voted to extend China permanent normal trade relations, a status that will smooth the way for China to enter the World Trade Organization (WTO) under the terms of a massive trade agreement that opens its market to U.S. goods and services.

Chinese officials enthusiastically greeted the 83-15 Senate vote in favor of the China trade legislation, even though they renewed their objections to a provision in the bill that creates a congressional commission to monitor China's human rights record.

"We hope the passage of the bill can become a new starting point and a chance to start anew," Foreign Ministry spokesman Sun Yuxi said.

But China first must wrap up negotiations at the Geneva-based WTO. Specifically, China must finalize an agreement with all 135 members on how it will abide by rules on trade-distorting practices such as subsidies, intellectual property and investment. Only then can the Chinese government formally approve the documents.

Mrs. Barshefsky said the Clinton administration hopes the process will be complete by the end of the year, even though most observers doubt that timetable is realistic.

The first commercial change in the agreement will come in the area of apparel, where Chinese exports to the United States are likely to surge in the first few years. Because China will join the WTO, the bilateral agreement that restricted Chinese apparel exports to the United States will expire automatically.

"China is the lowest-cost producer, so it's inevitable that they will export more," said Nicholas Lardy, a China specialist at the Brookings Institution.

As a result, China likely will export more products such as baby clothes and down jackets to the United States, giving U.S. consumers lower prices and better selection, according to Brenda Jacobs, a lawyer with Powell, Goldstein, Frazier & Murphy who specializes in textile and apparel issues.

According to the International Trade Commission, the change will widen the trade deficit, which hit a record $68.7 billion last year, even though the United States negotiated the WTO agreement to open China's market.

But, assuming China enters the WTO early next year, it will have to begin opening its market to U.S. goods and services of all types. Chinese tariffs on U.S. industrial goods will have to fall from 25 percent to just under 10 percent, while duties on agricultural products will drop from 31 percent to 14 percent.

In telecommunications and financial services, U.S. companies will be able to own much larger shares of joint ventures with Chinese companies.

But even strong supporters of the China trade bill, such as Sen. Max Baucus, Montana Democrat, avoided promises of dramatic change as a result of Tuesday's vote. Asked whether he expected China to fully comply with the massive pact a year after it joined the WTO, Mr. Baucus demurred.

"A lot can happen between now and then," he said. "There are no guarantees."

Early disputes with China, according to Mr. Mastel, could come in the area of agriculture. The well-organized farm lobby in Washington will lean strongly on future administrations to use the WTO dispute resolution system to force China to open the door to U.S. products.

The high-tech and services industries are also likely to keep close tabs on Chinese actions, because they are among the most competitive U.S. export sectors.

U.S. officials hope the WTO process, which puts Chinese actions under an international spotlight, will be a better way of opening the Chinese market than bilateral threats of trade sanctions.

"The Chinese don't like being seen as not living up to multilateral agreements," Mr. Lardy said.

The Clinton administration, keenly aware that the China trade agreement will demand trade officials' attention for years to come, in May announced a plan for enforcing the pact that includes a new post at the Department of Commerce devoted exclusively to China, funding for 25 more employees at the Office of the U.S. Trade Representative, and a special interagency group to monitor Chinese actions.

The administration requested $22 million for the enforcement project, but Congress has yet to approve the money.

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