Clinton wins a key WTO victory, but it won't be easy for U.S. businesses to break into China in a big way
By Michael Hirsh / Newsweek / June 5, 2000
For Bill Clinton at least, the hard part is over. As his staff gathered in the place where their boss once strayed with Monica Lewinsky-George Stephanopoulos's old West Wing office-to watch on C-Span, the president known for lurching from disaster to triumph waited upstairs in the residence for one of his greatest victories to unfold. Finally, the hard-fought House vote to grant China permanent normal trade relations went over the top, ending at a decisive 237-197. Clinton came down with a big smile. "This is just great!" he exclaimed. Later, in a congratulatory call to his ace trade negotiator, Charlene Barshefsky, he reminisced over the 13-year U.S. effort to bring China into the World Trade Organization, a drive that culminated in last week's PNTR vote. "This is historic," he told her. For him, clearly, it is. Clinton knows that while histories of his administration may well begin with impeachment, his WTO feat will help to balance the ledger.
But by January 2001, when Clinton leaves office, China will have just entered the WTO (if all goes according to plan). He won't be around when the really hard part begins: implementation. That will be mainly up to big business. In their biggest fight since NAFTA in 1993, U.S. business groups spent tens of millions lobbying for China's admission. Now, in the sober morning after of victory, they are assessing their sales prospects in China (the Senate vote, still at least two weeks away, is expected to be far easier). The verdict of most: sure, we're going to make more money, but succeeding in China is going to be a long march. "There will be problems that no trade lawyer ever dreamed of," says Willard Workman of the U.S. Chamber of Commerce. "You've got to ride the bicycle first to see how it works."
It's going to be a wobbly ride at best. Here's a safe bet: about this time next year, expect to read a lot of anniversary stories quoting frustrated U.S. businessmen in China, not to mention stymied democracy and human-rights activists. So fierce was the fight to win PNTR after 20 years of annual votes on granting Beijing "normal" trade status that, inevitably, supporters wildly oversold the bill's benefits.
A favorite theme was that freer trade will create a freer society. But Winston Lord, a former U.S. ambassador to Beijing, says that while he supported PNTR he thinks "it's going to set people up for disappointment down the road." Beijing is "gambling it can hang on to repression as it opens up the economy," says Lord. Even with WTO membership in common, the United States and China are "going to have a very tough relationship."
The business leaders who pushed hardest for PNTR also tend to be the least starry-eyed about change. The WTO deal requires that China slash tariffs across the board by the middle of this decade and open up its distribution channels. Currently U.S. firms must still sell to Chinese government agencies or companies, which pass on goods to stores-for a price. Now firms like Procter & Gamble, Kodak and Caterpillar can't wait to set up their own retail chains. But P&G executive Scott Miller says he expects big problems in enforcement, especially against the chronic Chinese practice of producing illegal knockoff products. "There's no FBI, no central regulatory authority," he says. "Local enforcement is very uneven, especially if it's the head man's brother-in-law who runs the local soap plant."
Breaking into China will be hardest, most agree, in the sector where Beijing fears that free trade and democracy intersect dangerously: the Internet and telecommunications. Already China has tried to crack down on its Internet users by monitoring service providers. But U.S. businessmen are still confident-and happy to give credit to Clinton. "For the first time in 20 years U.S. companies can begin to create and implement a business plan that goes longer than 10 months," says Workman. "It puts us back in the ball game against our European and Japanese competitors." As for Clinton, he hopes it puts him in the history books.
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