China may regret putting itself within WTO

By David DeRosa

NEW CANAAN, Connecticut (Bloomberg): U.S. Trade Representative Charlene Barshefsky appears to have secured a wide-ranging agreement on trade with China. This should clear the way for the United States to support China's accession to the World Trade Organization (WTO), except for one thing: The deal is dead on arrival if the U.S. Congress does not confer on China the permanent status of "normal trade relations."

The emphasis is on the word "permanent." From China's perspective, that would mean the U.S. Congress would never get to jerk China around again on most-favored-nation status. Do you think Congress will go along?

Frankly, the Chinese may be negotiating with the wrong people. Better to have stayed on the sidelines until a U.S. government takes the reins. After watching the test ban treaty go down in flames on the floor of the Senate, I think it's clear Congress is dead set on preventing Clinton from creating his presidential legacy, because it roundly detests him.

Any of the four leading Republican contenders for the presidency, Governor George W. Bush, Senator John McCain, Vice President Al Gore, or former Senator Bill Bradley, would have a better chance of getting a China bill through a Congress of either party's majority, just because they are not Bill Clinton.

How likely is it the current Republican Congress will surrender its power to stick it to China on issues like human rights? Don't bet your milk money on it.

It should be noted that China isn't helping its case with Congress by persecuting the semireligious Falun Gong or by its stance on Tibet's Dalai Lama.

Still for Congress, the real albatross that China wears around its neck is its alleged theft of U.S. military technology. China has made deep inroads into the technology to launch nuclear warheads with intercontinental ballistic missiles. The United States is so concerned about security that it's pressing the Russians to renegotiate the Anti-Ballistic Missile Treaty. If Washington gets its way, the United States will begin to build missile systems that can intercept and destroy incoming enemy warheads.

The other issue bound to show up in the congressional debates about China will be campaign finance irregularities -- an issue Republicans will attempt to connect to Gore.

Still, maybe I am too pessimistic. Is it a good deal for the United States to accept these trade concessions in return for supporting China's WTO bid? You bet it is. Barshefsky got plenty of concessions for American businesses and investors.

Membership in the WTO has obvious appeal for China. China would appear to have gained acceptance in the New World Order, there may be substantial trade benefits to members, and China's current leaders are all hankering to be recognized. This would be the icing on the cake.

Yet China may get a shock when its delegation attends the Seattle WTO ministers' meeting later this month. These meetings are likely to be a circus. Every special interest in the world will turn up to protest against the WTO, from labor to environmentalists to student activists.

The surprise development with the WTO is that it's rapidly turning into the No. 1 target of world activists. Did anybody see that coming? Wasn't the WTO supposed to be just a device to break down trade barriers and promote world growth? Suddenly it's not so chic to be on the side of globalization!

Labor everywhere thinks the WTO is its mortal enemy because it breaks down trade barriers. Workers think they are going to be out of jobs because the WTO is going to export their industries to places where manufacturing costs are cheaper.

The environmentalists think the WTO is trying to denude the forests of the world by liberalizing trade in wood.

The students, by the way, are really angry because the National Foreign Trade Council succeeded in overturning in court a Massachusetts law that banned commercial dealing with Myanmar, a totalitarian state. Judgment went to plaintiff partly on the argument that the Massachusetts Burma law interfered with the ability of the United States to uphold its responsibilities as a member of the WTO.

China may be in for serious disappointment if it gets into the WTO. Even if Clinton does score a win in Congress, China still needs the European Union, Canada, Switzerland and Norway to support its bid. It already has the support of Japan and Australia.

You have to assume China will make it in one of these days. Then Beijing may wonder what it's done to itself by giving the WTO authority to influence its internal commercial affairs.

This is unlikely to go down well in a country always skittish about external interference. China may come to regret putting itself within the grasp of the long tentacles of the WTO.

The writer is president of DeRosa Research and Trading and manages an investment fund. He is also an adjunct finance professor at Yale School of Management. His opinions don't necessarily represent those of Bloomberg News.