Committee on Ways and Means, Subcommittee on Trade, 6-8-99 Testimony

Statement of Robert A. Kapp, President
United States-China Business Council

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

Mr. Chairman, members of the Subcommittee:

Thank you for permitting me to offer testimony before this hearing on US-China Trade Relations and the Possible Accession of China to the World Trade Organization.

I am Robert Kapp, President of the United States - China Business Council. The Council is a private, nonprofit and nonpartisan business association headquartered in Washington. We support the business development efforts of more than 250 leading American companies in a broad range of commercial fields. Founded in 1973, the Council is the principal organization of US firms engaged in trade and investment with China. Many of our member companies have been working hard on their businesses in China for two decades; others are newer to the field, and approach opportunities for productive commerce with China with the innovativeness and energy that characterizes America's young, creative, and rapidly internationalizing business sectors.

I. U.S.-China Relations: The River and the Rapids

Mr. Chairman, we have had difficult moments over the past year on the China front, particularly in the very recent past. Both the United States and China have found, especially in the past few months, occasions to doubt each other's intentions, to wonder about the other's motivations, and above all to criticize the other's actions harshly and publicly.

Two months ago, the intense US-China effort to reach a decisive WTO package by the time of Premier Zhu Rongji's visit to the United States came tantalizingly close, but fell short; the past two months have apparently been unproductive. The shocking bombing of China's embassy in Yugoslavia took place a month ago; events within China in supposed response to the bombing have, not been helpful, to say the least. Two weeks ago came full publication of the Report of the Select Committee on U.S. National Security and Military/Commercial Concerns with the People's Republic of China, and with it not only renewed attention to the apparent chronic failings of American management of national secrets but also another ear-splitting exchange of media and political salvoes, some with truly apocalyptic overtones and some -- in both countries -- with gritty racial insinuation. Last week came the tenth anniversary of the Tiananmen violence, whose date happens to fall only one day after the legally-mandated deadline for presidential renewal of standing U.S. tariff policy toward China, and which continues to galvanize both public memory and media attention.

And yet, as I write this testimony on Sunday, June 6, momentary silence reigns. There appears not a single news report, feature article, opinion essay or editorial relating to China in those three news organs that sometimes seem to define the attention of the nation's policy-makers -- the Los Angeles Times, the Washington Post, and the New York Times. The Sunday TV talk shows, too, have moved on to other topics. For the moment, China is "off;" other stories are "on."

Mr. Chairman, U.S.-China relations are volatile, and they are spasmodic. On the surface, they are characterized by sudden eruptions of public, media, and political attention. They are, as people say, "event-driven." Time and again, the U.S. and China remind me of two people stuffed into a single kayak, running the rapids of a turbulent stream.

But the U.S. and China are heavyweight players in a very big game that does not live by news cycles, legislative calendars, Central Committee schedules, or other domestic rhythms alone. The task of policy makers in both countries, who do live in a world of such pulsing rhythms, is to build structures and forge enduring policies aimed at advancing national and shared interests over the long term. They must navigate a broader, and longer, river.

The U.S. and China have a big and growing relationship -- bilaterally, in the Asia-Pacific Region, and globally; economically, politically, culturally, and even ecologically. Beneath the jagged, seismograph-like lines of day-do-day events in the US-China relationship, there is and must be a quieter flow of longer-term involvement between the world's most powerful nation and largest economy on the one hand and the world's most populous and most rapidly-developing society on the other. Sustained, stable, and growing economic relations are a key element in this deeper process.

This hearing by the Trade Subcommittee of the House Ways & Means Committee provides a crucial opportunity, on Capitol Hill, for us all to remember the longer-term flow of U.S.-China involvement from which neither country can, or should in its own national interest, turn away.

II. NTR Renewal and China's Prospective WTO membership.

Mr. Chairman, I appear before the Subcommittee this year for the sixth time. In past years, the Trade Subcommittee hearing has been built around one thing: the Resolution of Disapproval offered annually in the House with the stated intention of overturning the action of the president in retaining for one extra year the ordinary tariffs (so-called "NTR," or "Normal Trade Relations" levies) on Chinese imports. Current U.S. law leaves these tariffs open to cancellation every summer. Passage of the Resolution would rupture U.S.-China economic relations and much, much more.

Members of this Committee need no reminders of the intensity of views that has usually accompanied this annual exercise; or of the intensity of the legislative and political maneuvering occasioned by the yearly NTR campaign; or of the ensuing feelings of resignation and futility that many Members of Congress have expressed as the annual NTR mini-drama has played itself out.

The U.S.-China Business Council has never, and will never, take for granted the renewal of these plain-vanilla tariffs on Chinese imports; we will never assume that this lowest-common-denominator baseline for the continuation of normal trade with our country's fourth-ranked trade partner, is immune to derailment, so long as the annual review mandated by a 1974 law written to force a now-defunct Soviet Union to permit the free emigration of Soviet Jews remains pointed at the heart of nearly $100 billion in legitimate US-China merchandise trade and more than $20 billion in legitimate American investment in China.

And yet, Mr. Chairman, as you have pointed out in calling this hearing, and as the comments by leaders of a set of key U.S. corporations (several of them members of the Board of Directors of the U.S.-China Business Council) have suggested today, this Annual NTR Renewal hearing of the Ways & Means Trade Subcommittee might -- just might -- turn out to be the last hearing of its kind.

With luck, with perseverance, and above all with a clear-eyed rededication to the stabilization and development of US-China relations by leaders and policy makers in both nations, the Congress may in coming months face the opportunity -- and the challenge -- of bringing home to America a majestic array of economic and commercial benefits achieved by U.S. negotiators after nearly thirteen years of tough engagement with China.

That opportunity, of course, will lie in the Congressional decision on whether to provide full WTO-member treatment to the People's Republic of China, and thus ensure for the United States full WTO-member treatment from China, as the PRC accedes to the global trading system's rules and obligations embodied in the World Trade Organization.

From evidence already in hand, it is apparent that the United States and China have made massive progress, much of it in the weeks and days preceding the visit of Premier Zhu Rongji to the United States in April, on a package of market-opening provisions that add up to the biggest advancement of U.S. commercial interests with China since the dawn of U.S. trade with the PRC in the 1970s. The remarks of business leaders earlier in today's hearing, and the numerous written statements addressed to Congress and the president in recent weeks from Members of the House and Senate as well as from dozens and dozens of companies and associations in agriculture, manufacturing, services, and consumer business, attest to the breadth of economic benefits to our country expected to flow from successful conclusion of negotiations over China's entry into the WTO.

Should the United States and China together rally the wisdom and the far-sightedness needed to return to the table, resolve outstanding issues, and complete the U.S.-China bilateral agreement on PRC accession to the World Trade Organization, it will fall to Congress to answer the question:

Having secured China's agreement to the broad menu of market-opening and other measures that we have fought for in the name of a "commercially viable" agreement for so many years, will the U.S. act to bring those benefits home to our companies, our manufacturing producers, our farmers, our consumers, and our communities? Or will we, instead, turn inexplicably away, spurning the very commercial and economic concessions that we have fought successfully to achieve, while those benefits flow to every other WTO member -- including our bitter competitors in Europe, Japan, and elsewhere?

We hope, Mr. Chairman, that if this historic opportunity does materialize this year, Congress will decisively choose the first of those two options.

Mr. Chairman, in the Annual MFN/NTR review process over the years, this hearing of the Trade Subcommittee has heard thoughtful comments from witnesses within and outside the Congress, not only about the specifics of U.S.-China commercial relations but about almost every aspect of U.S.-China relations and about many aspects of China's domestic affairs. The hearing has served as a useful opportunity each year to put both immediately-related and more broadly relevant issues on the table for Members, in the weeks preceding the annual vote on elimination of ordinary U.S. tariffs on Chinese imports.

Each year, for nearly a decade, Members of the House have listened, read, discussed, and sometimes argued these issues with all parties willing to engage them. I know personally how much time Members of Congress and their staffs have been willing to make available to me and others from the US-China Business Council, and to my colleagues from other associations and companies as well, under the broad rubric of the Business Council for U.S.-China Trade, whether each Member has been entirely to our views or not. We know that Members have listened with equal courtesy to other views on NTR renewal and on U.S.-China relations, sometimes expressed with great intensity of feeling. Each time we meet and engage on these questions, I feel a sense of excitement and pride at the unique openness of our system of government and the good will of those elected to make our laws.

And each year, the House has ultimately chosen to maintain the simple baseline of a normal economic relationship between ourselves and China -- not a favor to China, not the preferential tariff treatment we grant to several dozen other nations, but simply standard tariffs. The House's decision has not been unanimous, but it has been commanding; it has been thoughtful, and it has been bipartisan.

That decision to sustain -- or perhaps better, not to rupture -- our country's massive economic interaction with China, has been a critical prerequisite to the powerful progress that the U.S. has managed to achieve this year on the hundreds of issues surrounding China's admission to the WTO; without NTR over the years, it is impossible to imagine the two countries moving as far as they apparently now have done on the bigger, more structural changes that WTO imposes on China.

Conclusion

Thus, Mr. Chairman and Members of the Subcommittee, the decision to maintain NTR tariffs for the coming year is as fully justified as it has been in the past: it is the cornerstone of a normal bilateral trade and economic relationship and the precondition for gradual expansion of the broad stream of positive U.S.-China contacts. Make no mistake: the continuation of normal economic intercourse between China and the U.S. augurs well for China's continued movement in directions that virtually all Americans would applaud, while the rupturing of economic ties as a result of NTR elimination would, in our view, contribute nothing to the elimination of conditions within China to which many Americans take exception.

Beyond that, though, NTR renewal is a humble but critical prerequisite for something far bigger, and something far more promising for the long-term interests of the United States: conclusion of US-China bilateral negotiations on the terms of China's accession to the rights, rules, and obligations embodied in the World Trade Organization. We urge the Subcommittee, the House Ways & Means Committee, and the Congress to support vigorously annual NTR extension by defeating the Resolution of Disapproval. The US-China Business Council urges the Congress to support with equal vigor, when presented with the opportunity, the extension of full WTO-member status to China, so that we can enjoy the fruits of what promises to be a very significant victory for the American economy and for global economic progress.

Thank you for including these remarks in the record. I have attached a few additional items, by way of illustrating the dimensions of current US-China commercial relations and by way of illustrating an example of what we believe is the constructive role American business plays in the broader US-China Relationship. The recent announcement of grants from the U.S.-China Legal Cooperation Fund is a small but promising example of support -- in this case by member companies in the US-China Business Council -- for the kind of long-term building-block work that US-China relations require. To date, the Congress has declined to provide any support for similar work at the government-to-government level, in spite of repeated annual requests. We hope that the Congress might in the future be willing to do its part to help with this and other positive programs of US-China cooperation in areas of truly shared interest.

[THE OFFICIAL COMMITTEE RECORD CONTAINS ADDITIONAL MATERIAL HERE.]