The Inscrutable West

May 29 1997 3:30 AM

The Inscrutable West

Why China is puzzled by Clinton's fight over MFN.

42000_42705_byoxfordanalytica

Renewal of China's Most Favored Nation trading status--the privilege that allows an overseas nation to sell its goods at the lowest possible level of tariffs in the giant U.S. market--is an annual struggle. Every year, the president favors renewal. On each occasion, a significant section of Congress is unconvinced. This pattern has repeated itself for the past decade, no matter which party controls the White House or Congress. In every case, the president has prevailed and MFN status has been awarded for another 12 months.

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Although this year's dispute may be more intense and the final margins closer than last year's, Congress will not derail China's MFN status unless Beijing commits an act of monumental folly over the next few weeks. The rules favor the occupant of the White House. Under U.S. law, the president has until early June to declare formally his support for MFN renewal. Congress then has a maximum of 90 days to decide whether it wants to reject the presidential preference. Even if both houses of Congress vote against MFN, the administration can veto the legislation. In effect, MFN rejection requires not merely a simple majority, but one of two-thirds in both the House of Representatives and the Senate.

In the past, Congress has come nowhere near even a simple majority in either chamber. In part, this is because the various pressure groups hostile to China have known that success was too unlikely to merit their mobilizing troops. It also reflects the enormous pressure brought to bear by the U.S. business community, which is aware that placing restrictions on Chinese trade would lead to swift retaliation from Beijing. Even in the aftermath of the Tiananmen Square massacre, the power of corporate interest has always prevailed over other concerns. Clinton can be quietly confident that it will do so again.

However, MFN renewal should not be interpreted as a sign that U.S.-China relations have resumed a more intimate path, or that opponents of the administration's "constructive engagement" approach are in retreat. In fact, the opposite is true. Policy toward China remains the most difficult and divisive aspect of U.S. foreign relations. Successful MFN renewal simply reflects the peculiar circumstances that affect this element of the China debate. Moreover, proponents of a closer U.S.-China relationship have been forced to compromise. Clinton had hoped that Congress would vote to make MFN status a permanent fixture this year, thus ending this annual, largely symbolic fight. Any such aspirations were abandoned several months ago.

The administration is engaged now in a defensive strategy aimed at preserving what it can of the constructive-engagement ideal until congressional pressure eases. For the moment, Clinton has largely succeeded in limiting the damage. However, three factors--which could surface at any time--may derail his ambitions:

Campaign finance: The campaign-finance scandals that have tarnished Clinton's second term could spin out of control. The most politically explosive accusation is that agents of the Chinese government attempted to influence the 1996 elections in favor of Clinton and the Democrats through covert campaign contributions, and that administration officials were warned about the practice but did not act. If either the current FBI investigation or congressional hearings substantiate these allegations, the White House will have little option but to distance itself from China. Beijing would, in turn, react furiously.

Hong Kong: The imminent return of the British-administered territory to Chinese rule has galvanized anti-China activists inside the United States. They will insist, through legislation and other means, that Beijing's behavior toward Hong Kong become the yardstick by which Washington determines its level of cooperation with China. The high profile and emotive power of the Hong Kong issue will make it very difficult for the administration to ride roughshod over such demands.

China's WTO bid: Beijing is keen to be included in the World Trade Organization and, subject to certain conditions, the U.S. State Department would like to facilitate its application. However, a majority in Congress either favors a much tougher stance toward Beijing or rules out its WTO membership altogether. The position of those seeking further trade-liberalization concessions from Beijing has been strengthened by recent increases in China's huge trade surplus with the United States.

U.S. law does not require the president to request congressional support before supporting a WTO bid. However, Clinton would risk legislative revenge if he tried to pursue the issue in the face of firm majorities against him in Congress. Beijing, however, believes that if Clinton were to spend political capital on pushing China's membership in the WTO, he could prevail--as he did on NAFTA and WTO ratification. Should Clinton decide not to try, Beijing will react badly to what it will perceive as prevarication. Should he try and then fail, Beijing will conclude that it is dealing with a weak administration.

MutualMisunderstanding

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