By Adam Entous
WASHINGTON (Reuters) - U.S. congressional support for a landmark trade agreement with China was hanging in the balance on Monday, as lawmakers scrutinized Beijing's response to the presidential election in Taiwan.
So far Beijing's reaction to Saturday's election of Chen Shui-bian, whose party leans toward independence from China, has been restrained.
But Clinton administration officials and lawmakers who support the market-opening agreement fear that could change, given warnings from Beijing before the vote that Chen's victory could spark war.
"The administration is scared out of its mind," said one congressional aide, who has been working closely with the White House to shore up Senate support for the trade agreement ushering China into the World Trade Organization (WTO).
Lawmakers warned that any provocation by China could prompt a backlash from Taipei's supporters on Capitol Hill against the trade deal, which would open a wide range of Chinese markets, from agriculture to telecommunications.
"It would ruin their chances of ever joining the WTO," said Republican Sen. Charles Grassley of Iowa, chairman of the Senate Finance subcommittee on trade.
It could also lead to passage of legislation that would increase U.S. military ties with Taiwan.
"Now that the election is behind us, the waters will be tested again on how and when to bring this (legislation) forward and, hopefully, to resolution," Senate Majority Leader Trent Lott's spokesman, John Czwartacki, said of the Taiwan Security Enhancement Act.
Sen. Fred Thompson, a Tennessee Republican, said he was drafting his own legislation that could crack down on Beijing for continued weapons proliferation by denying Chinese companies like PetroChina access to U.S. capital markets.
PetroChina, China's largest producer of crude oil and natural gas, plans to raise billions of dollars in a global offering and list shares on the New York Stock Exchange, a move that has drawn fire from some lawmakers and the AFL-CIO labor federation.
In exchange for China opening its markets, the White House says Congress must grant Beijing permanent normal trade relations (NTR) -- a status it now gets only after an annual congressional review. Permanent NTR would guarantee Chinese goods the same low-tariff access to U.S. markets as products from nearly every other nation.
President Clinton has asked Congress to approve the legislation by June, fearing further delay would bog it down in election politics. The U.S. general election is in November.
Cross-Strait Tensions
But congressional aides said those plans were jeopardized by cross-Strait tensions.
Chen's Democratic Progressive Party has independence as a central platform, but during campaigning Chen said that if elected he would not hold a referendum on independence or change the flag and constitution.
"Taipei and Beijing...need to exercise restraint and refrain from provocative actions," said Sen. Max Baucus, a Montana Democrat and leading supporter of permanent NTR. "Both...should recognize Congress will be watching closely."
"You have an increasing number of people over here wondering why we should move this quickly when (China) is as bellicose as it has been," Thompson said.
Despite objections from the White House, Senate Republican Leader Lott of Mississippi may soon press for passage of legislation boosting military ties with Taipei, and for the United States to approve new weapon sales to help defend the island, which Beijing regards as a renegade province.
Passage of the Taiwan Security Enhancement Act would anger China. It could also drive a wedge between Clinton, who has promised to veto the bill, and free-trade Republicans, a group the president needs to ensure passage of permanent NTR.
In the bitterly-divided House of Representatives, where the trade agreement is already in peril, the administration fears renewed saber-rattling by Beijing would further enrage lawmakers, dooming permanent NTR for the year.
"This is not rocket science," said Robert Kapp, president of the U.S.-China Business Council.
"Whether it was before the election or after the election, heightened military tensions between Taiwan and the mainland...does not help to maintain Congress' comfort level on any policy issue relating to (China), including permanent NTR," Kapp added.:
