Don’t Strengthen the WTO by Admitting China

The congressional debate over China’s trading status with the United States and its entry into the WTO has stirred a parallel debate among the directors and staff of Foreign Policy In Focus and within the two organizations—Institute for Policy Studies and Interhemispheric Resource Center—that sponsor the FPIF project. This essay is the second in a series of FPIF discussion papers examining the internationalist and nationalist tendencies within the fair trade movement in the United States.

It is unfortunate that the first major post-Seattle legislative battle is over China and the WTO. The Seattle protests offered a stinging critique of the WTO and strong arguments for its downsizing or elimination, and opened up space for a debate on which rules and institutions should replace it. The current congressional debate over China and the WTO is not about these issues, but rather over the conditions that should accompany China’s joining a deeply flawed institution.

There are good reasons to oppose China’s entry into the WTO, and to oppose the current framework for granting permanent normal trading relations (PNTR) with the United States. However, these reasons do not include the singling-out of China on its human rights record. The challenge for the post-Seattle coalition of citizen organizations is to conduct the China debate in a way which builds upon the North-South and cross-sectoral alliances that were strengthened in the Seattle and Washington protests. Many Southern groups are rightly alarmed by the hyperbolic that some opponents of PNTR have used. The tactic of singling out China as the great rogue nation on a range of issues weakens the strong North-South alliances that are critical to shifting the direction of the global economy. There are strong “internationalist” reasons to oppose the China deal, and we urge education and advocacy to center on these arguments.

Since his first run for the presidency in 1992, Bill Clinton has paid lip service to the concerns raised by labor unions, environmental groups, and others over the social impacts of free trade. But while spouting touching rhetoric about “putting a human face on globalization,” he has continued to pursue new trade deals that expand the power of global corporations, to the detriment of workers and communities throughout the world.

The Clinton Administration’s trade agreement with China, announced shortly before the WTO Ministerial in Seattle in December 1999, is one such deal. This agreement exclusively addresses market access issues, while ignoring the potential impact on employment, environment, and democracy. The scepticism about whether the United States is pursuing a social agenda in good faith is greatly enhanced by the U.S. announcement of an agreement between the United States and China to permit China’s entry to the WTO. From the perspective of advocates for a WTO social agenda in trade agreements, the key question is how the United States could manage to reach agreement on a complex series of issues paving the way for China to join the WTO—including issues of intellectual rights protection, textile quotas, and investment barriers—but somehow manage to come up short on securing agreement to begin a meaningful process on social standards? Indeed, insiders to the negotiations confirm that neither labor rights nor human rights were even mentioned in the context of the negotiations. Some within the administration have argued that such issues are best left to an agreement dedicated to these subjects, and have made much of a long-stalled bilateral dialogue on human rights. In reality, throughout 1999, the relationship between the United States and China was negatively affected by a number of factors, including the U.S. bombing of a Chinese embassy in Bosnia. One of the only venues for exchange was the trade talks, and the U.S.government did not hesitate to use this venue to bring up a number of bilateral concerns. Why not, then, labor or human rights? The subject of labor rights should have been particularly germane to the discussion, as the administration had recently announced its support for a working group on labor within the WTO. The fact that China opposes such a working group, and that the United States did nothing to secure any change in China’s position on this issue, suggests that the United States is not serious about WTO reform. Advocates of alternatives to the current free trade agenda must make serious concern and discussion of social issues a precondition to individual bilateral country negotiations.

We do not support the permanent normalization of trade relations with China at this time for the same reasons that we do not support any efforts to strengthen the current trade and investment institutions without explicitly addressing social and environmental concerns. The massive protests in Seattle against the WTO, as well as recent protests against the World Bank and International Monetary Fund in Washington, DC, have only underscored the widespread public rejection of the trade and investment liberalization agenda.

Even the publications of these free trade-promoting institutions reveal the fact that there is no clear link between increased trade and improved living standards for average people. The World Bank’s recently released Global Development Finance report, for example, shows tremendous increases in export volume in all regions of the world during the past decade. At the same time, the report shows only slight increases in GDP per capita and consumption in some regions and actual declines in Europe and Central Asia, Sub-Saharan Africa, and the Middle East and North Africa. This disconnect bolsters the importance of workers and communities fighting for their fair share in the benefits of trade, investment, and economic activity.

Some policy makers within China are well aware of the potential negative repercussions of trade liberalization and, even in a restrictive political environment, have generated a serious debate on this issue within China. These academics and officials have questioned the effects of the WTO deal on workers and farmers (points discussed in detail in the following section), and have raised warnings about the certain social unrest that further trade liberalization will engender. U.S. officials have chosen to ignore the internal debate within China, selecting and bolstering the position of officials such as Vice Premier Zhu Rongji, who they regard to be sympathetic to the U.S. trade agenda. Advocates in other countries should consider making common cause with those voices in China that have dared to suggest that the interests of Chinese workers and farmers should take precedence over the political goals of certain Chinese leaders.

Rather than expanding the free trade agenda, now is the time to put the brakes on these policies so that the world can pursue a serious discussion about new rules for the global economy that will reduce inequality and promote enhanced protection of labor and human rights and environmental standards. Thus, we oppose not only the current China deal, but also the Africa Growth and Opportunity Act, the Caribbean Basin Initiative, fast track trade negotiating authority, and the extension of NAFTA into a hemispheric agreement to be called the Free Trade Area of the Americas (due to be completed in 2005). However, we strongly support the need to develop alternatives to these proposals to ensure that the benefits of global trade are broadly shared by the world’s citizens; thus we were encouraged by the alternative trade bill for Africa, Jesse Jackson Jr.’s HOPE bill. For us, the China-related legislation is one more battle in the long fight FOR new rules to guide the process of globalization that place the concerns of workers and communities at the center. It is not a battle AGAINST China.

There are specific implications of the current China deal that are of particular concern.

WTO membership limits a country’s ability to set domestic economic and social policy. In China’s case, workers have even more to lose from a reduced government role in the economy than those in most countries. Currently, more than 100 million Chinese work in state-owned enterprises. China’s entry into the WTO will speed up privatization, resulting in millions of layoffs. Free market reforms, including cuts in subsidies for state-owned enterprises, have already caused millions of layoffs, provoking an explosion of protests in many cities. Entry into the WTO is expected to accelerate job loss, including one million layoffs in the textile industry and six million in the auto industry.

In the agriculture sector, the impacts will be even more severe. Peasant farmers now make up more than 80 percent of the country’s population. As a result of subsidy cuts and trade liberalization, it will be very difficult for China’s small-scale farming to survive competition with global agribusiness corporations. Even the Chinese government concedes that an estimated 10 million peasants will lose their livelihoods once the country joins the WTO. A preview of what could come can be seen in the tragic situation of farmers in Mexico. Since the passage of the NAFTA, hundreds of thousands of Mexican peasants have lost their land due to drastic cuts in subsidies and a flood of cheap imports from the American grain belt.

On top of unemployment fears, Chinese workers will face an erosion of social welfare programs. Tariffs collected on imports have been a major source of the revenues used to support China’s social welfare system. WTO membership will reduce these revenues, likely leading to soaring costs for health care and other services. According to the Asia Pacific Center for Justice and Peace, “China used to be able to say with some validity that while their system did not protect individual liberties, it did provide for social and economic rights better than a free market economy such as the United States. Now, increasingly, the Chinese system combines the worst features of capitalism and socialism.”

Foreign direct investment in China to date has resulted in no increased protections for human rights, nor specifically for workers’ rights. In fact it is likely that such investment has led to the rise of new types of rights abuses in China. U.S. and other foreign direct investment in China has expanded dramatically since 1990, principally in the light manufacturing industries of south China, but this investment has led to new types of rights violations. Certain types of rights abuses, such as arbitrary detention, lack of due process, torture, and arbitrary application of the death penalty have remained chronic in China. Other rights violations, notably abuses of workers in these new enterprises, have been on the rise; these abuses include excessive overtime, arbitrary fines and other punishments, and exposure to hazardous chemicals and workplace conditions. These problems are exacerbated by China’s unique system of internal migration controls, which bond the worker to the factory by giving the employer control over his or her residence permit. Far from enjoying newfound economic freedom, millions of Chinese workers now find themselves working as bonded laborers for foreign enterprises.

The Clinton Response

The Clinton administration argues that these types of abuses will be remedied by “constructive engagement” with China through the country’s membership in a “rules-based” trading system. In reality, there is nothing to suggest that China’s entry into the WTO will translate into greater respect for human rights. This is not simply due to recalcitrance on the part of China itself; China’s major diplomatic partners, including the United States, must share the blame. A bilateral “dialogue” on human rights virtually ground to a halt last year. A longstanding memorandum of understanding on prison labor has never been implemented. When the U.S. government fails to take seriously its commitment to engaging China on any issue other than trade, why should we expect the Chinese government to respond differently?

We have welcomed the vigorous debate around the upcoming congressional vote on PNTR, to the extent that it has provided another opportunity to examine the free trade model. However, we are alarmed at a number of statements and arguments by some of these critics that are reminiscent of some of the worst “China-bashing” of the past 100 years. In particular, some in the Pentagon, Congress, and the conservative think tank arena, desperately in search of new enemies in the aftermath of the Cold War, are painting an inaccurate picture of China as the great new military threat to U.S. interests in Asia. There is ample evidence that China remains militarily weak and poses no threat (See James H. Nolt’s FPIF policy brief on U.S.-China-Taiwan Military Relations). We would urge the AFL-CIO and other progressive allies who oppose PNTR with China to speak out actively against this attempted launching of a new cold war with China. This is a vital issue for the months and years to come.

Alternatives to “China-Bashing”

We offer caution to those who are painting China as the worst abuser of human rights in the world. While acknowledging that China has been a systematic violator of worker rights and of many political and civil rights, we must also give China credit for respecting many economic and social rights. And, overall, there are countries with records as poor as China’s on human and worker rights that are already WTO members. Of course, the U.S. record on many of these rights is far from perfect.

The real problem is the U.S. government. By bilaterally negotiating the deal that becomes the key step for China joining a multilateral agency, the United States once again demonstrated the 800-pound gorilla approach that has proved to be a major constraint to healthy international cooperation on serious policy issues. As long as the United States insists on attempting to call the shots in every international institution, it will be impossible to overcome the justifiable suspicions of governments and activists around the world that any new international mechanisms to strengthen enforcement of worker rights and environmental standards will only be manipulated by the U.S. government to serve its own needs.

Thus, instead of arguing that China should be singled out, we support the proposals of the International Confederation of Free Trade Unions (ICFTU) concerning the development of a mechanism that would provide incentives for all nations to adhere to international labor standards. We acknowledge the criticisms of many that such a mechanism should not be placed in the current undemocratic WTO with its free trade mandate. However, we support calls for a more democratic global trade and investment regime that would be geared toward promoting sustainable societies and dignified work. In such an institution, China and all nations would undergo a review every several years on whether they are taking steps to respect core rights, with any nation that fails to meet the criteria facing the same sanctions. (The ICFTU recommends that the International Labor Organization (ILO) be responsible for carrying out the review). Furthermore, the labor and human rights standards that all countries must respect should be drawn from the core conventions of the ILO and from the Universal Declaration on Human Rights.

We believe that bilateral initiatives can be important, and note that the Australian, Swedish, and Brazilian governments have successfully engaged in bilateral dialogues with China on human rights. Bilateral initiatives to address labor, environmental, and human rights issues should be encouraged, and understood as important building blocks toward a multilateral process to deal with these issues. For example, in recent years, countries have raised concerns related to China’s compliance with international human rights treaties at the meetings of the UN Commission on Human Rights. This is an appropriate arena in which to build support for serious review of countries’ human rights records.

We also support the idea of binding human rights principles for corporate investors in China. Again, we believe the goal is not to single out China per se, but to acknowledge the excessive attention of the U.S. business community in promoting the current China trade deal. U.S. corporations have gone so far as to argue that by their very presence, they will ensure better respect for human rights and rule of law in China. The evidence of 20 years of market reform in China for such a claim is slim indeed. The initiative to bind corporations to human rights principles may set an important precedent for the creation of global trade rules that hold corporations, as well as governments, accountable for upholding social protections for citizens of trading nations.

We also join the millions of voices around the world calling for debt cancellation for developing nations. As long as these countries are in the stranglehold of debt, there will always be the pressure to attract foreign investment by any means necessary. This often means offering an oppressed workforce and lax environmental enforcement.

We also support the proposal that citizens anywhere in the world should be granted the right to sue U.S. corporations in U.S. courts for violations of worker rights and environmental laws—no matter where they are committed. Giving average citizens this new right would be one way of promoting what we would consider true “constructive engagement.”

These are a few of the ideas that we believe should be at the center of a global dialogue. During and after this China debate, we should focus a great deal of our energy on designing institutions that can advance the rights and standards of people in China, the United States, and the rest of the world. Healthy communities, dignified work, and a clean environment require new institutions and rules. Clearly, the current governing institutions of the global economy—the WTO, the World Bank, and the International Monetary Fund—are dangerously outmoded for the enormous new challenges of this century.