Statement of the Honorable Calvin M. Dooley, M.C., California

Testimony Before the Subcommittee on Trade
of the House Committee on Ways and Means

Hearing on United States-China Trade Relations and the
Possible Accession of China to the World Trade Organization

June 8, 1999

Chairman Crane and members of the committee, thank you for allowing me to testify today on the very timely issue of U.S.-China Relations and the possible accession of China into the World Trade Organization (WTO.)

Clearly, the U.S. relationship with China is complicated. Recent events including the bombing of the Chinese embassy in Belgrade, China's reaction to the bombing, and evidence of spying at our national labs have only added additional complexities to that relationship.

We are all in agreement that we must take all steps necessary to protect our national security interests and to ensure that our counterintelligence programs prevent future security breaches. But at this critical juncture, we would be foolish to abandon our economic and political relationship with China, and with it, our ability to influence their economic, political, and humanitarian policies in the future. We cannot afford to embrace a Cold-War mentality that would demonize and isolate China. A policy of economic and political engagement is the surest way to promote U.S. interests in China, to advance democracy and human rights within China, and to enhance future economic opportunities for U.S. workers and businesses.

Since the reestablishment of diplomatic relations with China in 1979, total trade between our two nations has increased from $4.8 billion in 1980 to $75.4 billion in 1997. This makes China our fourth largest trading partner. China's economy is growing at an average rate of almost 10 percent a year, making it one of the fastest growing economies in the world.

In order for the United States to remain the dominant economic power in the world, we cannot close the door on the most populous nation in the world. China will continue to have a growing influence on the world's economy. For U.S. businesses and workers to continue to prosper and grow, we need continued economic engagement with China by renewing Normal Trade Relations and finalizing a WTO agreement that will bring China into the international trade community.

The United States has been aggressively pursuing a WTO agreement for the past 20 months, and while an agreement has not been finalized, the deal currently on the table presents tremendous market opportunities for all sectors of the U.S. economy including agriculture, information technology, financial services, and manufacturers. Ambassador Barshefsky and her negotiating team are to be commended for their extraordinary efforts in reaching this unprecedented agreement.

As a member who represents the nation's number one agricultural district, I want to thank the Administration for negotiating an agreement that presents tremendous opportunities for U.S. producers. With respect to agriculture, high Chinese tariffs on nearly all agriculture products would be reduced substantially over the next four years. On beef we would see tariffs reduced from 45 percent to 12 percent, on citrus from 40 percent to 12 percent and on wine from 65 percent to 20 percent. In fact, the deal currently on the table would reduce tariffs for agricultural products to levels below those of most American trading partners. Furthermore, the agreement on the table would eliminate China's export subsidies for agricultural products including cotton, rice and corn, which will allow U.S. farmers to compete on a more level playing field and enhance U.S. efforts to curb European export subsidies.

It is projected that by the year 2003, 37 percent of the world food demand will come from China. American ranchers and farmers are the most efficient and competitive in the world. The WTO agreement on the table would move to level the playing field and allow U.S. agriculture tremendous access to the world's largest agricultural market.

And agriculture isn't the only sector that would benefit. The agreement would also open Chinese markets to a number of U.S. industrial products and services including information technology products, automobiles, insurance and financial services. Quotas on information technology products would be reduced from 13.3 percent to zero, and China would agree to adhere to the Information Technology Agreement negotiated in 1996. In addition, the agreement offers U.S. investment in telecommunications and entertainment for the first time, and would subject China to WTO requirements on intellectual property protection to ensure respect for U.S. copyrights, trademarks and patents. Automobile tariffs would be reduced from 80-100 percent to 25 percent. American insurance companies would be able to sell a wide range or products throughout China, as compared to the current policy that limits life insurance sales to Shanghai and Guangzhou. And American banks would be able to operate anywhere in China.

And while a WTO agreement would present tremendous opportunities for U.S. workers and businesses, bringing China into the WTO is more than just a matter of market share. China's accession into the WTO would lock China into a rules-based international organization and bring them into the legal framework of the international community through the WTO. In addition to tariff reductions and other market access agreements, bringing China under the umbrella of the WTO would make China accountable for it's trade practices and subject to WTO enforcement actions.

I support the Administration's policy, and am encouraged by recent reports that negotiations will resume in the near future. In spite of the recent strains place on our relationship with China, it is in our overwhelming interest to finalize a WTO agreement and maintain our policy of economic and political engagement. A policy of continued engagement is the most effective tool we have to protect our national security interests and promote our economic and political ideals. I look forward to working with my colleagues on the committee and with the Administration to advance this important policy.