Mandarins and Moguls Unite for China's Most-Favored Nation Status

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This article was first published as Mandarins and Moguls Unite for China's Most-Favored Nation Initiative" in PR Watch, Volume 4, No. 1, First Quarter 1997. It original article was authored by John Stauber and Sheldon Rampton and is used here with permission. As with all SourceWatch articles, feel free to edit and revise.

Mandarins and Moguls Unite for China's Most-Favored Nation Initiative

During Bill Clinton's first presidential campaign against George Bush, he called for cutting off China's access to American markets unless democratic changes were made, and said China's "most-favored nation" (MFN) status should be linked to whether it chose to "recognize the legitimacy of those kids that were carrying the Statue of Liberty" in the pro-democracy Tiananmen Square demonstrations in 1989.

For major corporations like Boeing and Motorola, however, China's 1.2 billion people represent a huge potential market for products ranging from cellular phones to airplanes to Coca-Cola and Big Macs. By the mid-1990s, the China market accounted for 10 percent of total sales for the Boeing aircraft conglomerate. Analysts predict that China's rapidly-growing economy will move from being the third largest in the world to number one in the next century. "Projections suggest vast future demand for infrastructure and for consumer products--all of which American companies would like to provide," reported the National Journal.

Alarmed by Clinton's original insistence on linking trade to human rights, corporate lobbyists launched a massive campaign in 1994 which succeeded in reversing Clinton's position. "The result," observed the New York Times, "has been an extraordinary struggle pitting executives against former torture victims and prison camp survivors and persecuted Christians in a competition to win the attention of Congress and the Administration."

"In the final weeks leading up to . . . Clinton's decision to grant most-favored-nation trading status to China, Washington was swarming with lobbyists pushing MFN," stated the Legal Times. "The advocates ranged from an ad hoc group of two dozen major US companies to the Emergency Committee for American Trade (ECAT), a group of 60 chairmen and chief executives of US-owned exporters. . . . Among the lobbyists taking part were R. D. Folsom, a vice president at the D.C. lobby shop R. Duffy Wall and Associates, who represents the Footwear Distributors and Retailers of America; Michael Daniels, a partner in the D.C. office of the New York law firm Mudge Rose Guthrie Alexander & Ferdon; and Mark McConnell and Warren Maruyama, partners at the D.C. law firm Hogan & Hartson."

As a face-saving measure, Clinton drafted a "voluntary code of conduct" for US businesses operating in China and other countries where human rights violations occur. The "voluntary code" came under immediate criticism from Amnesty International and other human rights organizations. "It's essentially milquetoast; it lacks political will," said Jim O'Dea, Amnesty International's Washington director.

Even milquetoast, however, was too strong for China's corporate allies. "A code of conduct for China would send the wrong message--that there is a problem with the way American companies are operating in China, " said Calman Cohen, vice president of the Emergency Committee for American Trade. The problem is with the Chinese government. American companies are (already) promoting human rights in China by simply bringing the democratic values of a market system."

Bowing to Boeing

In 1994, US exports to China reached $9 billion, and US companies were drooling at the prospect of further expansion. "By the year 2020, China will have the largest telecommunications network the world has ever known," said William Warwick, head of AT&T's China operations. "If you are not in China, you will not be able to compete anywhere in the world, including the United States. There are no other places like it."

"I come from the nation's most trade-dependent state, Washington state," said Rep. Jennifer Dunn (R-WA, where Boeing delivered 8 out of 9 congressional votes in 1996). "I believe that trade with China promotes change. US trade and investments teaches the skills of free enterprise that are fundamental to a free society. . . . These products further serve to unleash the free market desires of the Chinese people."

Meanwhile, US imports from China topped $30 billion--a trade deficit of more than $20 million, which cast a different light on the number of US jobs "created" by corporate investments in China. "While the public debate on MFN tends to focus on imports and exports, much of the passion in this discussion is a result of the corporate decision to use China as a low-cost production location," testified the AFL-CIO's Mark Anderson during the 1996 congressional hearings.

"We should be clear," Anderson said. "US multinational companies, the major force behind MFN extension, have adapted to Chinese investment requirements transferring not only capital but valuable technology and jobs. Using low-cost oppressed Chinese labor, they are establishing and contracting with manufacturing export centers to compete directly with US production. Their support for MFN extension is principally about protecting those investments and not about expanding US exports and employment or promoting democracy in China. Indeed, we have reached the point where the most ardent defenders of Chinese communism are US capitalists."

By 1996, corporations set their sights on a longer-term strategy--changing the terms of the debate by making China's MFN status permanent so it would not have to undergo further annual reviews. "People are getting sick of going through this annual ritual," complained Thomas Tripp, public policy director for Boeing, which joined other companies in a project called the "China Normalization Initiative," aimed at changing US attitudes toward China.

"It's really an overall grass-roots education effort to help (Americans) understand China relations," said Boeing official Lawrence Clarkson. "We're not trying to apologize for China, but we're trying to help explain what the Chinese are all about."

"We are contacting Chinese-American organizations, government officials, mayors, journalists, to form a broad-based coalition," explained Michael Schilling, director for government relations at multinational military supplier TRW Inc. "We'll write our op-eds, organize events covered by the press, do forums, bring in prominent Chinese officials . . . . The media has done a terrific job in pointing out all negatives. What it hasn't done is given people a feel for the dynamism in China, the entrepreneurialism, the progress."

The campaign even produced its own video, "New Faces of China," which the New York Times described as "a remarkably dewy-eyed depiction of China--no repression of dissidents, no sales of automatic weapons to gangs in Los Angeles, no nuclear proliferation, but plenty of Chinese enjoying American goods."

Let a Thousand Flowers Bloom

"Its organizers, intent on playing up the idea that the new push is homegrown in states and cities, not Washington-driven, say it doesn't really have a formal name," reported the National Journal on June 1, 1996. "And they are reluctant to talk in detail about how it came together. Still, trade specialists around Washington are well aware of the campaign."

It's primarily the multinational companies, said a Clinton administration official. They end up revving up a lobbying effort on every one of these trade agreements. The companies have realized that it makes more sense to begin to build a sustained grass-roots constituency within states or congressional districts where their particular business is important to the economy, he said.

In Kansas, Boeing worked with a statewide international trade group to spread its message to community organizations, local businesses and political leaders.

In Michigan, General Motors public affairs director Ed Berry recruited some 80 small and medium-sized Michigan companies--mostly GM suppliers--to join a coalition devoted to lobbying the state's congressional delegation, holding informational meetings with news media editorial boards, and lining up resolutions of support from local chambers of commerce and industry groups.

In Connecticut, the local grassroots effort was led by the United Technologies Group. In Florida, United Technologies and Motorola teamed up to deliver 16 out of 23 votes.

In Oregon, Nike led the the way, delivering 4 out of 5. It's very, very important," said Nike director of government relations Brad Figel. "We're sourcing about one-third of all our shoes in China. Every athletic footwear company is in the same boat.

The grassroots campaign tied in with a "grasstops" strategy that mobilized former high-ranking government officials to argue China's case. "Increasingly, many of our most distinguished and, in theory, disinterested, experts on US China policy are selling their reputations and knowledge to clients with very particular business interests in China," noted the March 10, 1997 New Republic. "Almost every prominent former government official who speaks out on this subject has direct or indirect financial ties to China. Most of them are Republicans, because a Republican administration first re-established ties with China in 1972, and because Republicans controlled the White House for most of the next twenty years. Besides [Henry] Kissinger and [Lawrence] Eagleburger, they include: former Secretaries of State Alexander Haig and George Shultz, former Secretary of Defense Dick Cheney, former National Security Adviser Brent Scowcroft, former US Trade Representatives Carla Hills and Bill Brock, and former Senate Majority Leader Howard Baker. But Democrats have also gotten in on the China game. Besides Vance, there is, for example, former Secretaries of State Edmund Muskie and Warren Christopher, former Ambassador to China Leonard Woodcock, former US Trade Representative Robert Strauss and former Senator Gary Hart."

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