GLW: Sino-Us trade deal will cement capitalist restoration

Green Left Parramatta glparramatta at
Wed May 24 19:02:21 MDT 2000

The following article appears in the latest
issue of Green Left Weekly (,
Australia's radical newspaper.


CHINA: Sino-US trade deal will cement capitalist restoration


Despite the Chinese Communist Party's push for the reintroduction
of capitalist relations of production in China, the triumph of
capitalism there is not yet certain. However, if US President
Bill Clinton's November deal with Beijing for the US to grant
permanent ``normal trade relations'' (NTR) for China wins the
approval of the two houses of parliament -- the Congress vote is
slated for this week (starting May 22) -- the floodgate would be
opened wide to a tide of mandatory changes that could decisively
roll back the central gains of the 1949 Chinese Revolution.

The imperialist powers' increasing ability to pressure China and
sway its course originated in a 1978 CCP decision to ``open
China's door'', essentially to foreign investment, which was
previously banned, as well as greater foreign trade.

Whatever Beijing's motives for this decision, its implementation
and the associated increasing privatisation have seriously
undermined China's planned economy.

What remains of the state sector has been so marginalised that
few people remain convinced that those entities which Beijing
still labelled as state firms actually form part of a coherent
planned sector geared to serve social needs.

That erosion of China's socialist economy will deepen if the NTR
deal is pushed through because under it Beijing would surrender
even more crucial controls of the economy, especially on foreign
trade and domestic distribution. The deal ensures that any gains
will go to US capital such that more economic decisions in China
will be dictated by private profits, essentially to the benefit
of US-controlled multinationals.

Horrific concessions

Even a quick scan of the key terms of the NTR makes horrifying
reading. These are, at present, concessions for US capital, but
once China joins the World Trade Organisation (WTO), which is
likely within months, the extension of similar concessions to the
other WTO members (135 at present) is almost guaranteed.

The agreement covers virtually all sectors. A crucial plank is
the ending of the state monopoly, mostly within three years, on
the importing, distributing and exporting of most goods --
industrial, agricultural and transport, even in the sensitive
areas of telecommunications, wholesale, maintenance and repair.

In agriculture, the average tariffs for US priority produce
(including pork, beef and poultry) will be slashed from 31.5% to
14.5% by January 2004 or earlier. As well, the imports of bulk
commodities of strategic importance (such as wheat, corn, rice,
barley, soybean oil and cotton) will be relaxed, and all export
subsidies will be banned.

In industrial products, the key tariff reductions include an
across the board average cut to 9.4% by 2005 (from 24.6% in
1997), a cut to 7.1% on US priority goods, a cut to zero on
computers, telecommunications equipment, semiconductors, computer
equipment and other high technology products, a cut to 25% by
2006 (from 80-100%) for cars, with most reductions loaded up
front, and cuts to 10% by 2006 for car parts, to 5% (from 12-18%)
for wood, to 7.5% (from 15-25%) for paper and to 0-6.5% for the
vast majority of chemicals.


In addition, all restrictions on the quantity of imports will be
eliminated progressively within five years (just two years for US
priority products, such as fiber optic cable).

For all major service categories, restrictions on foreign
ownership have been significantly relaxed (allowing full control
in some cases), to be implementation mostly within a few years.
The new privileges will be extended to all existing firms in this

For banks and insurance firms, in particular, imperialist
capital's long battle to secure the right to sell services to the
Chinese population (in hitherto sensitive areas such as local
currency transactions with Chinese firms and group, and health
and pension insurance products) is largely won.

The dramatic concessions in telecommunications, a hitherto highly
restricted area, will have significant social implications. For
example, China's key telecommunications corridor of Beijing,
Shanghai and Guangzhou, which captures 75% of all domestic
traffic, will open immediately in all telecommunications
services, including the internet. From a complete ban on foreign
ownership in any telecommunications establishments, a 49% stake
will be allowed across the board within a few years (with the cap
raised to 50% in value-added paging services within two years).

Wholly US-owned firms will also be allowed to run rental,
leasing, air courier, freight forwarding, storage and
warehousing, advertising, technical testing and analysis,
packaging services and hotels within three to four years.

The list goes on. Its scope is wide-reaching, with specific and
detailed schedules for implementation and punishment for
non-compliance (visit <> for details). The terms
are set to sweep what little is left of China's state firms off
their feet, leaving little room for pretence that they could
still function as part of a coherent socialist economy.

Due to past colonial or semi-colonial subjugation, the lower
productivity level of a Third World country such as China makes
it nearly impossible for its economic entities to compete
effectively with their counterparts from imperialist countries.
The removal of protection from First World competition will
devastate them.

State sector under siege

A White House summary emphasises that the Sino-US permanent NTR
agreement ``will ensure that state-owned and state-invested
enterprises will make purchases and sales based solely on
commercial considerations, such as price, quality, availability
and marketability''. Will any room be left for social concerns?

``China has also agreed that it will not influence these
commercial decisions (either directly or indirectly) except in a
WTO consistent manner ... purchases of goods and services [by
these firms] do not constitute `government procurement' and thus
are subject to WTO rules.''

With all these generous concessions, unimaginable until a year
ago, what is China getting in return? Increased exports to US?
Perhaps. But as part of the deal, the US will be able to prevent
any significant such rises. It will retain for 15 years the right
to ``retaliate'' (by imposing extra duties) against ``dumping'' by
China, which will be found guilty if its production costs are
lower than those of a third country chosen by the US as a

The US can retaliate for another 12 years if the increased
imports of Chinese goods have caused, or threaten to cause,
``market disruption to a US industry''.

Perhaps China can benefit from greater transfer of US technology?
Unlikely. Until now, China has been able to set as a condition
for admitting foreign investment or import licenses requirements
such as transfer of technology and research capability, mandatory
offsets or a prescribed local content input. But these conditions
will be banned under the NTR deal.

Clinton explained to Congress in a January 24 letter, ``Americans
will, for the first time, have a means ... to combat such
measures as forced technology transfer ... As a result, we will
be able to export to China from home, rather than seeing
companies forced to set up factories in China in order to sell
products there.''

Clinton added, ``It is important to understand the one-way nature
of the concessions ... China has agreed to grant the US
significant new access to its market, while we have agreed simply
to maintain the market access policies we already apply to China
by granting permanent NTR.''

For China, the benefits arising from an NTR -- entitlement to
much lower tariffs for exporting its goods to the US -- will now
be secured rather than open to scrutiny by the Congress once a
year, as has been the case since 1980.

There is little doubt that the US market is important for China.
About a quarter of China's international trade was deals with the
US (US$85.5 billion out of US$324 billion in 1998). Moreover,
China's trade surpluses, crucial especially to its foreign
currency reserves, would have been turned into significant
deficits if the US market was gone. China's trade surplus with
the US in 1998, for example, was US$57 billion (US$69 billion in
March), while its overall surplus with the world was only US$44

So, secure access to the US market is valuable, but is it worth
such a high price? After all, China has been getting the
temporary NTR (called ``most favoured nation'' until 1998) for the
last 20 years.

Locking China in

There are two other possible reasons why Beijing might have been
lured to this deal. Based on alleged US evidence that China sold
ballistic missiles to Pakistan in 1992, Washington is said to be
considering punishing China with economic sanctions. A decision
was said to be due in late May-early June (Far Eastern Economic
Review, May 18), but the US could have used inaction on the
sanctions as a bargaining chip in the trade deal.

Secondly, the trade pact and China's entry to the WTO can be a
powerful framework within which to lock China into the path of
capitalist restoration. The privatisation of state firms has met
considerable domestic resistance -- from sections of the CCP
whose interests would be endangered and from the affected
workers. The rulers in Beijing, headed by Jiang Zemin, might
appreciate the help that will be delivered by the WTO/NTR
commitments to speed up state sector dismantling.

Whether or not these factors were part of Beijing's calculations
are a matter of speculation, but there is little doubt that under
the NTR pact, the jobs and living standard of hundreds of
millions of people will come under further attack. The opening of
agriculture is expected to have a particularly devastating effect
on China's enormous rural population, as well as the country's
food security.

In its November 16 edition, the Beijing Youth Daily estimated
that within seven years of China joining the WTO, 14.5% (500,000)
of jobs in China's car industry will disappear, as will 3.6% (10
million) of agricultural jobs.

The paper also predicted rises of 52% and 24% respectively in
clothing and textile jobs, but these gains are questionable given
that the imperialist countries can easily retaliate (and they
have done so) using anti-dumping rules in the WTO.

Washington knows very well that the trade deal can boost China's
capitalist restoration. Clinton said in his January 24 letter:
``This agreement obligates China to deepen its market reforms,
empowering leaders who want their country to move further and
faster toward economic freedom. It will expose China to global
economic competition and thereby bring China under ever more
pressure to privatize its state-owned industry and accelerate a
process that is removing the government from vast areas of
China's economic life.''

US trade representative Charlene Barshefsky was less subtle. In a
March 10 address to the National Conference of Editorial Writers,
she likened the trade deal to attempts of imperialist powers to
force open the China market between the 1700s and the early
1900s. She added, ``This [deal] is so fundamental in its fabric
because the agreement attaches itself to economic life in China,
not in selected treaty ports or enclaves, but economic life in

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