This Is The Vote That Changed China Forever
This weekend, tomorrow in fact, will mark 20 years that China was voted by the U.S. Congress to be approved for Permanent Normal Trade Relations. It was May 2000. It set the table for China’s entrance into the World Trade Organization. And the rest, for anyone making kitchen knives at a tool shop outside of Chicago or a hospital still in need of N95 face masks, is well known history at this point. China makes almost everything.
They make all the solar panels. Unless we make them here, the Green New Deal will be a Red New Deal.
They make nearly all of the chemical inputs found in medications, depending on the drug.
They’re climbing up the lithium-ion battery and semiconductor food chain fast.
Germany is getting nervous. Pretty soon, the Germans will only be designing and selling Mercedes Benz and BMWs. The engines and the chassis will all be made in China, and the imports will arrive via train along the new Silk Road. This is great for China and Chinese labor.
Voting for normalized trade relations with China back then was a bipartisan effort. Everyone agreed China had to be brought into the Western world’s globalization plans.
The vote in the Senate was 83-15. A near total landslide.
President Bill Clinton signed the legislation into law on October 10, and said, “China will open its markets to American products from wheat to cars to consulting services, and our companies will be far more able to sell goods without moving factories or investments there.”
House Representative Bill Archer from Texas was the lead sponsor of the bill. He said, “The American people support this agreement because they know it’s good for jobs in America and good for human rights and the development of democracy in China.”
Hindsight — as the cliche goes — is 2020.
In 2020, the American congress would never support such a thing, and if they did, surely not in a similar landslide vote.
But corporations will.
Disney did not mind filming Mulan in Xinjiang, home to tens of thousands of Uyghur Muslim men held up in what Beijing calls “re-education centers”. Human rights and democracy are not on the march in China. No one in the Western world would say so, unless they were wholly dependent on doing business with China, which, we know, is a growing number of companies and brands. Talk bad about China, or make an off color joke, and risk boycotts and loss of market share, as Dolce & Gabbana and one of its models found out last year.
The Senate’s vote on September 19, 2000 took a soldering iron to the U.S. and China economies. It later made China a manufacturing center for American multinationals like Nike NKE and Dell DELL , and in less than 10 years, it unleashed a China backlash that now even has pro-China presidential candidate Joe Biden talking tough.
China is increasingly a vote getter, which may be why Biden is now trying to showcase himself as Trump-lite on China.
Large corporate interests have been able to scapegoat China, for the most part. China’s the bad guy, but the companies themselves, and their brands, are still fine.
A survey by the Shanghai American Chamber of Commerce, released last week, showed that more than 75% of the hundreds of U.S. companies doing business there for exporting to the U.S. were not going to leave, they were not going to rejigger their supply chains despite all the political pressure that started under President Trump and the trade war.
That day in DC 20 years ago to invite China into the free trade club was arguably the vote that changed the world, says Baron Public Affairs, a political risk firm in Washington.
Within a year of that vote, China joined the WTO. Its membership now pits the world’s most free and open economy (ours), with the world’s least free and closed economy (China’s). Something has got to give. It may be that the WTO just becomes a debate forum, like the United Nations, with no real teeth. It may mean that China opens up more — and indeed it has opened up its economy more.
It may also mean that the U.S. becomes more like China — insofar as Washington discovers it needs government to promote and protect industries not only to foster innovation, but to keep people employed. That’s the China way.
The establishment view on China has not changed. Until Trump came to town. With the exception of a handful of Republican hawks in the Senate, like Marco Rubio, Josh Hawley and Tom Cotton. Senate Majority Leader Mitch McConnell is little help on the China front. With the exception of Senate Minority Leader Chuck Schumer, the Democrats have been relatively mum on China out of risk of appearing in Trump’s camp on this one.
Democrats and Republicans, in recent history, were on the same page when it comes to China trade policy.
President Bill Clinton likened normalizing trade with China as “a hundred-to-nothing deal for America when it comes to the economic consequences.”
There is no way China is ever going to accept a hundred-to-nothing deal for itself and its people. Or as they might say in Mandarin: 永远不会发生!
Then-Secretary of State Madeleine Albright said, “Economically, America gives nothing in this deal. All we agree to do is maintain the same open markets and policies toward the Chinese products that have already expanded choices and lowered prices for U.S. consumers.”
Gene Sperling, Director of the National Economic Council under President Clinton (and again in the Obama/Biden Administration), said China’s market opening to the U.S. was a bonanza. “The agreement we negotiated with China is a one-way deal.”
Sperling is correct, of course. It was a one way deal, with capital flowing out of the U.S. and into China. The trade deficit has not shrunk since then, meaning the U.S. is importing more Made in China goods. If it is Made in China, someone has to make it. Unless a robot is making it — or a ghost — then someone is being employed to make it and the U.S. is buying it, whatever it is. Sometimes the item may be made into a higher value good, like a car. Other times it is something picked up off the shelve, like a Disney toy.
The Chinese government has opened its market for more capital to flow into it, meaning their companies are now capturing more American dollars into their stocks and bonds. But the Chinese government has not allowed for its locals to do the same here.
Only recently has JP Morgan and Goldman Sachs GS been able to open up a financial services firm in mainland China without having to partner with a Chinese bank. That’s only happened in the Trump years.
Amazon AMZN is not in China. Google — at least its search engine, its email platform and YouTube, are banned. Facebook is banned. Twitter is banned.
President George W. Bush extended China’s permanent trade status when he was president. He said, “We trade with China because trade is good policy for our economy, because trade is good policy for democracy, and because trade is good policy for our national security.”
The U.S. had no face masks, ventilators and limited hospital gowns in the middle of the worst pandemic since the Spanish Flu. They are mostly made in China.
Some saw a China backlash coming back then, but they were in the minority.
Among the 15 no votes on China were two political polar opposites: old school Southern conservative Senator Jesse Helms (R-NC) and new school progressive Senator Paul Wellstone (D-MN).
Helms was Chairman of the Senate Foreign Relations Committee at the time. Helms said of his minority point of view on China’s communist party, “Those of us who as a matter of conscience have been stalwart anti-communists through the 1960s and 70s, when détente was the order of the day, know a little about what it is like to swim against the current of the times.” As a consequence of going against the grain, smearing Jesse Helms “became the norm in Georgetown, Cambridge, and Manhattan,” wrote New York Times columnist Walter Russell Mead in 2001.
Helms’ view was almost prescient, however. “We Americans stand for something – something other than profits. The Chinese government continues to repress, to jail, to murder, to torture its own citizens.”
And then there was Wellstone, a man many saw as the next POTUS after Bill Clinton before he died in a plane crash.
Wellstone had his own crystal ball. In it, he saw a decrease in U.S. blue collar labor at manufacturing jobs in his home state of Minnesota and said at the time that “China’s immense pool of exploited labor and lax regulation can only accelerate this race to the bottom, especially if we end Congress’s annual review of China’s trading privileges.”
That’s been ended, actually. Or at the very least, China’s status is never voted upon.
Senator Cotton said last week that he will introduce legislation to force Congress to vote on whether China deserved the “most favored nation” status allowed to all WTO member states.
The WTO recently said that Trump’s trade tariffs against China broke its membership rules, which state tariffs can only be applied due to dumping charges, or discoveries that have led to temporary countervailing duties against a product coming in from abroad.
The Trump Administration basically told the WTO to go pound sand.
Robert Lighthizer, the U.S. Trade Representative, quipped that maybe the U.S. should just define itself an emerging market economy, like China, so it can play by different rules.
Twenty years ago tomorrow marked the vote that gave China its newfound status as the world’s No. 2 economy.
You’re yesterday’s news.
The U.S. may be, too.
What can’t China do? What can’t China make? They have the best port logistics. They have low cost capital, like the U.S. They have abundant labor, more than the U.S. They excel at STEM while the U.S. focuses on the humanities. And their motive is often not profit, but job creation and retention. They will quite literally make a widget for a $1 and sell it to you for $0.50 if it means keeping hundreds of people employed.
Wellstone knew it way back when.
“What kind of future do we want, anyway?,” he said. “A future in which subsistence wages and abuse of worker rights drag down standards across the globe, or a future in which we civilize the global economy so it can work for working families at home and abroad?”
That question has been answered by the majority, and it’s the latter. Like before, it’s Washington that is still trying to figure it out.