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United States-China trade relations : hearing before the Subcommittee on Trade of the Committee on Ways and Means, House of Representatives, One Hundred Third Congress, second session, February 24, 1994 online

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UNITED STATES-CHINA TRADE RELATIONS



Y 4. W 36: 103-85

United States-China Trade Relations.



HEARING

BEFORE THE

SUBCOMMITTEE ON TEADE



OF THE






COMMITTEE ON WAYS AND MEANS U
HOUSE OF REPRESENTATIVES

ONE HUNDRED THIRD CONGRESS

SECOND SESSION



FEBRUARY 24, 1994



Serial 103-85



Printed for the use of the Committee on Ways and Means




? :■-



U.S. GOVERNMENT PRINTING OFFICE
S3-541 cc WASfflNGTON : 1994



For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-046021-2




UNITED STATES-CHINA TRADE REUTIONS



Y 4. W 36: 103-85

United States-China Trade Relations.



HEARING

BEFORE THE

SUBCOMMITTEE ON TEADE



OF THE



COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES

ONE HUNDRED THIRD CONGRESS

SECO^fD SESSION



FEBRUARY 24, 1994



Serial 103-85



Printed for the use of the Committee on Ways and Means




U.S. GOVERNMENT PRINTING OFFICE
83-341 CC WASHINGTON : 1994



For sale by the U.S. Government Printing Office
Superintendent of Documents. Congressional Sales Office, Washington, DC 20402
ISBN 0-16-046021-2



COMMITTEE ON WAYS AND MEANS
DAN ROSTENKOWSKI, minoU, Chairman



SAM M. GIBBONS, Florida
J.J. PICKLE, Texas
CHARLES B. RANGEL, New York
FORTNEY PETE STARK, California
ANDY JACOBS, JR., Indiana
HAROLD E. FORD, Tennessee
ROBERT T. MATSUI, California
BARBARA B. KENNELLY, Connecticut
WILLIAM J. COYNE, Pennsylvania
MICHAEL A. ANDREWS, Texas
SANDER M. LEVIN, Michigan
BENJAMIN L. CARDIN, Maryland
JIM McDERMOTT, Washington
GERALD D. KLECZKA, Wisconsin
JOHN LEWIS, Georgia
L.F. PAYNE, Virginia
RICHARD E. NEAL, Massachusetts
PETER HOAGLAND, Nrf)ra8ka
MICHAEL R. MCNULTY, New York
MIKE KOPETSKI, Oregon
WILLIAM J. JEFFERSON, Louisiana
BILL K. BREWSTER, Oklahoma
MEL REYNOLDS, Illinois

Janice Mays, Chief Counsel and Staff" Director
Charles M. Brain, Assistant Staff Director
Philup D. Moseley, Minority Chief of Staff



BILL ARCHER, Texas
PHILIP M. CRANE, Hlinois
BILL THOMAS, California
E. CLAY SHAW, JR., Florida
DON SUNDQUIST, Tennessee
NANCY L. JOHNSON, Connecticut
JIM BUNNING, Kentucky
FRED GRANDY, Iowa
AMO HOUGHTON, New York
WALLY HERGER, California
JIM McCRERY, Louisiana
MEL HANCOCK, Missouri
RICK SANTORUM, Pennsylvania
DAVE CAMP, Michigan



SUBCOMMnTEE ON TRADE
SAM M. GIBBONS, Florida, Chairman



DAN ROSTENKOWSKI, IlHnois
ROBERT T. MATSUI, California
BARBARA B. KENNELLY, Connecticut
WILLIAM J. COYNE, Pennsylvania
L.F. PAYNE, Virginia
RICHARD E. NEAL, Massachusetts
PETER HOAGLAND, Nebraska
MICHAEL R. McNULTY, New York



PHILIP M. CRANE, Illinois
BILL THOMAS, California
E. CLAY SHAW, JR., Florida
DON SUNDQUIST, Tennessee
NANCY L. JOHNSON, Connecticut



ai)



CONTENTS



PafB

Press release of Thursday, February 3, 1994, announcing the hearing 2

WITNESSES

U.S. Department of State, Hon. Winston Lord, Assistant Secretary for East

Asian and Pacific Affairs 74

Office of the U.S. Trade Representative, Hon. Charlene Barshefsky, Deputy

U.S. Trade Representative 89

Abercrombie, Hon. NeU, a Representative in Congress from the State of

Hawaii 38

American Association of Exporters and Importers, Fermin Cuza 180

American Chamber of Commerce in Hong Kong, Ljm W. Edinger 170

American Federation of Labor and Congress of Industrie Organizations

(AFL-CIO), Jeffrey Fiedler 271

American TejctUe Manufacturers Institute, Charles V. Bremer 248

Asia Watch, Mike Jendrzejczyk 115

Balcombe, Rev. Dennis, Revival Christian Church 195

Bergsten, C. Fred, Institute for International Economics 238

Bremer, Charles V., American Textile Manufacturers Institute 248

Conable, Hon. Barber B., Jr., National Committee on United States-Ciiina

Relations 50

Cuza, Fermin, American Association of Exporters and Importers, and Mattel,

Inc 180

Dreier, Hon. David, a Representative in Congress from the State of Califor-
nia 7

Edinger, Lyn W., American Chamber of Commerce in Hong Kong 170

Emergency Committee for American Trade, KJl. Williams 163

Fang, Lizhi, Phoenix, Ariz 138

Fashion Accessories Shippers Association, Inc., Joel K. Simon 261

Fiedler, Jeffrey, American Federation of Labor and Congress of Industrial

Or^nizations (AFL-CIO) 271

Cyan, Lodi G., International Campaign for Tibet 203

Hall, Robert, National Retail Federation 243

Himmelfarb, Anne, Puebla Institute 219

Hughes, Julia K., United States Association of Importers of Textiles and

Apparel, as presented by Martin Lewin 254

Independent Federation of Chinese Students and Scholars, Heping Shi 231

Institute for International Economics, C. Fred Bergsten 238

International Campaign for Tibet, Lodi G. Gyari 203

Jendrzejczyk, Mike, ^ia Watch 115

Kamm, John, Kamm & Associates, Ltd 147

Kapp, Robert A., U.S.-China Business Council, Washington Council on Inter-
national Trade, and Washington State China Relations Council 188

Kolbe, Hon. Jim, a Representative in Congress from the State of Arizona 25

Kopetski, Hon. Michael J., a Representative in Congress from the State

of Oregon 42

Lantos, Hon. Tom, a Representative in Congress from the State of California . 9
Lewin, Martin, United States Association of Importers of Textiles and

Apparel 254

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IV

Page

Mattel, Inc., Fermin Cuza 180

McDonnell Douglas Corp. Douglas Aircraft Co., K.R. WUliams 163

National Committee on United States-China Relations, Hon. Barber B. Con-
able, Jr 50

National Council on Chinese Affairs, Haiching Zhao 127

National Retail Federation, Robert HaU 243

Pelosi, Hon. Nancy, a Representative in Congress from the State of Califor-
nia 27

Puebla Institute, Anne Himmelfarb 219

Revival Christian Church, Rev. Dennis Balcombe 195

Russ Berrie & Co., Inc., Joel K. Simon 261

Shi, Heping, Independent Federation of Chinese Students and Scholars 231

Simon, Joel K., Fashion Accessories Shippers Association, Inc., and Russ

Berrie & Co., Inc 261

Smith, Hon. Christopher H., a Representative in Congress from the State

of New Jersey 13

Solomon, Hon. Gerald B.H., a Representative in Congress from the State

of New Yorif 5

Tseo, George K.Y., Pennsylvania State University 279

United States Association of Importers of Textiles and Apparel, Julia K.

Hughes, as presented by Martin Lewin 254

U.S.-China Business CouncU, Robert A. Kapp 188

Washington Council on International Trade, and Washington State China

Relations Council, Robert A. Kapp 188

Williams, K.R., Emergency Committee for American Trade, and McDonneU

Douglas Corp. Douglas Aircraft Co 163

Wolf, Hon. Frank R., a Representative in Congress from the State of Virginia 21

Zhao, Haiching, National Council on Chinese Affairs 127

SUBMISSIONS FOR THE RECORD

Amnesty International USA, statement 285

AMT — The Association for Manufacturing Technology, statement 299

Boeing Co., statement 304

Fertihzer Institute, Gary D. Myers, letter 308

International Ladies' Garment Workers' Union, AFL-CIO, Jay Mazur, state-
ment 310

Kennelly, Hon. Barbara B., a Representative in Congress from the State

of Connecticut, statement 312

Leather Apparel Association, statement 313

Stark, Hon. Pete, a Representative in Congress from the State of California,

statement 317

Toy Manufacturers of America, Inc., David A. Miller, statement 321



UNITED STATES-CHmA TRADE RELATIONS



THURSDAY, FEBRUARY 24, 1994

House of Representatives,
Committee on Ways and Means,

Subcommittee on Trade,

Washington, D.C.
The subcommittee met, pursuant to notice, at 10:05 a.m., in room
1100, Longworth House Office Building, Hon. Sam Gibbons (chair-
man of the subcommittee) presiding.

[The press release annoimcing the hearing follows:]



(1)



FOR IMMEDIATE RELEASE SUBCOMMITTEE ON TRADE #25

THURSDAY, FEBRUARY 3, 1994 COMMITTEE ON WAYS AND MEANS

U.S. HOUSE OF REPRESENTATIVES

1102 LONGWORTH HOUSE OFFICE BUILDING

WASHINGTON, D.C. 20515

TELEPHONE: (202) 225-1721

THE HONORABLE SAM M. GIBBONS (D. , FLA.), CHAIRMAN,

SUBCOMMITTEE ON TRADE, COMMITTEE ON WAYS AND MEANS,

U.S. HOUSE OF REPRESENTATIVES, ANNOUNCES

A PUBLIC HEARING ON

UNITED STATES-CHINA TRADE RELATIONS

The Honorable Sam M. Gibbons (D. , Fla.), Chairman of the Subcommittee
on Trade, Committee on Ways and Means, U.S. House of Representatives,
today announced that the Subcommittee will hold a public hearing on
U.S. -China trade relations, with particular emphasis on implementation of
the Administration's May 28, 1993, Executive order conditioning the
extension of China's most -favored-nation (MFN) status beyond July 3, 1994,
on human rights progress in China. The hearing will be held on Thursday,
February 24, 1994, in the main Committee hearing room, 1100 Longworth
House Office Building, beginning at 10:00 a.m.

Title IV of the Trade Act of 1974, the so-called Jac)cson-Vanik amend-
ment, governs United States trade relations with nonmarket- economy coun-
tries, including China. Title IV sets forth freedom-of -emigration
criteria that must be met or waived by the President, as well as minimum
provisions that must be included in a bilateral trade agreement, in order
for the President to grant MFN status to a nonmarket -economy country.

MFN status was first granted to the People's Republic of China on
February 1, 1980. China's nondiscriminatory trade status has been
extended annually since then on the basis of a Presidential waiver of the
freedom-of -emigration requirements in subsections 402(a) and (b) of the
Trade Act of 1974.

Unless renewed, the President's waiver authority, and consequently
China's MFN status, expires as of July 3 each year. The renewal procedure
under section 402(d) (1) requires the President, if he determines that
waiver-authority extension will substantially promote freedom-of-
emigration objectives, to submit to the Congress a recommendation for a
12-month extension no later than 30 days prior to the waiver's expiration,
i.e., no later than June 3, together with his reasons for the recommenda-
tion. The President may, at any time, terminate by Executive order any
waiver granted under section 402. The extension of the waiver authority
for an additional 12 months is automatic unless a joint resolution of
disapproval is enacted into law within 60 calendar days after the July 3
expiration of the waiver authority.

On May 28, 1993, President Clinton announced his decision to waive
for another 12 months the freedom-of -emigration requirements under
Title IV of the Trade Act of 1974 for China, thereby granting this country
MFN status between July 1993 and July 1994. At the same time, President
Clinton issued an Executive order stating that China will be expected to
meet seven conditions in order to receive MFN status beyond July 1994.

The conditions attached to the mid-1993-mid-1994 extension of China's
MFN status are largely human rights related, including requirements for an
acceptable accounting and release of political prisoners in China and for
assurances on the humane treatment of Chinese prisoners. On five of the
seven conditions, the Administration is seeking "overall significant
progress," that is, progress measured by examining how far China has come
one year from the date of the Executive order on all five considered
together. The other two conditions, those on emigration and the export of
goods made using prison labor, are so-called "must meet" conditions. The
Executive order directs the Secretary of State to prepare a report before
June 3, 1994, on the extent to which China has complied with the specified
conditions .

The Executive order also directs the Secretary of State and other
appropriate U.S. officials to pursue all "legislative and executive
actions" to ensure that China abides by its commitments to follow fair,
nondiscriminatory trade practices in dealing with U.S. businesses, and



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- 2 -

adheres to the Nuclear Non-proliferation Treaty, the Missile Technology
Control Regime guidelines and parameters, and other non-proliferation
commitments .

DETAILS FOR SUBMISSION OF REQUESTS TO BE HEARD :

Requests to be heard must be made by telephone to Harriett Lawler,
Diane Kirkland, or Karen Ponzurick [telephone (202) 225-1721] by close of
business Monday, February 14, 1994. The telephone request should be
followed by a formal written request to Janice Mays, Chief Counsel and
Staff Director, Committee on Ways and Means, U.S. House of Representa-
tives, 1102 Longworth House Office Building, Washington, D.C. 20515. The
Subcommittee staff will notify by telephone those scheduled to appear as
soon as possible after the filing deadline. Any questions concerning a
scheduled appearance should be directed to the Subcommittee office
[(202) 225-3943] .

In view of the limited time available to hear witnesses, the Subcom-
mittee may not be able to accommodate all requests to be heard. Those
persons and organizations not scheduled for an oral appearance are encour-
aged to submit written statements for the record of the hearing. All
persons requesting to be heard, whether they are scheduled for oral
testimony or not, will be notified as soon as possible after the filing
deadline.

Witnesses scheduled to present oral testimony are requested to
briefly summarize their written statements. The full statement will be
included in the printed record.

In order to assure the most productive use of the limited amount of
time available to question hearing witnesses, witnesses scheduled to
appear before the Subcommittee are required to submit 150 copies of their \
prepared statement to the Subcommittee on Trade office, room 1136 Long-
worth House Office Building, at least 24 hours in advance of their
scheduled appearance. Failure to do so may result in the witness being
denied the opportunity to testify in person.

WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE :

Any interested person or organization may file written comments for
inclusion in the printed record of the hearing. Persons submitting
written comments for the printed record should submit at least six (6)
copies of their comments by the close of business Monday, February 28,
1994, to Janice Mays, Chief Counsel and Staff Director, Committee on Ways
and Means, U.S. House of Representatives, 1102 Longworth House Office
Building, Washington, D.C. 20515. If those filing written statements for
the printed record of the hearing wish to have their statements distribut-
ed to the press and the interested public, they may provide 100 additional
copies for this purpose to the Subcommittee office, room 1136 Longworth
House Office Building, before the hearing begins.

FORMATTING REOUIREMENTS :

Each tIatWTwnt pmantsdfor printing to ttM ConwniltM by ■ wtnM*. any wrtttn (latinwnt oraxhM wbiniUM) forth* printMl laconlorany wriUen
oommanti in mpona* to ■ raquatt for wrldan c a <nm» n t » muM conform to the guideinm ittad below Any ttatomanl or oxtiUt not in compliance with
(has* guidatnas unl not b* prailad. but w« ba mantanad m Iha ConvniUaa Mas for raview and u«a by tti* CorrunOaa

1 . Al itatafnanla and any aooompanymg axtii>to for printing mual ba typad in tingia ipaca on lagaMza papar and may not axoaad a total of
10 pages.

2. Copia* of wttola documanti •ubmiltod as axtiM material «>■ not ba accepted for printing. Instead, axhM malarial should be reforenced and
quoted or paraphrased. Al exhM material not meeting Itiese spedAcations «ni be ntaintained in the Committee flas for review and use by
the Comminee

3. Slalanienis must oontair) the neme end capad^r in which the witness wii sppear or. for written comments, ttie name and capadly of the person
sulxnilling tiie statement as wel n sny cients or persons, or any organization for whom the witness appears or for whom the statement is



4. A supplemental sheet must accompany each statement istng the name, fol address, a telephone numberwiiere Itie witness or the designated
representative may ba raeched and a topical outkna or summary of the comments and racomniendations in the fol statement This
supplemental sheet wi not be induded in the printed record

The above restrictions end iniilabons apply only to malarial bang submined for printing Statements and axhlills or supplementary material
submitled solely for distrkulion to the Me m bers, the press end the public during the course of a pubhc hearing may t>e submined in other forms



Chairman Gibbons. Good morning, folks. Let us come to order.

As everyone knows, this is a meeting of the Ways and Means
Subcommittee on Trade. We are here to examine at midterm
progress toward the implementation of the President's May 28 Ex-
ecutive order on China's MFN status.

I announced 1 year ago that we would have these midterm hear-
ings. As I just told Ms. Pelosi, I regret that they were not in Janu-
ary, but I think everyone is familiar with the congressional sched-
ule and knows how tough it has been to schedule these hearings.

MFN for China is one of the most difficult issues we face, and
we are going to have to face it for years to come, it looks to me,
unless someone can suggest a better way to manage U.S. -China re-
lations.

Since I announced these hearings, I have been thinkirig, and
thinking hard, about where we stand on the whole issue of China's
MFN status. I do not believe that enough progress has been made
to date to justify the President's recommending to the Congress
that China receive MFN for another year. But there is still time,
and I am optimistic that the Chinese themselves, working with us,
will address the deficiencies in their human rights record, thereby
making MFN extension possible for another year.

I support what the President is doing. I think it is wise. And I
want to lend as much vigor to his operation as I can.

Members of the Committee on Ways and Means and its Sub-
committee on Trade visited China last year, in August. We met
with many, many officials there, including the President of China.
Our message was very clear: That we wanted to see better treat-
ment of the Chinese people by the Chinese Grovernment; we wanted
to see a greater emphasis upon human rights. We presented a list
of political prisoners whom we thought should be released imme-
diately. Some have been released. And we had constructive meet-
ings with the Chinese officials.

I am very impressed with the physical progress that has been
made in China over the years in which I have been privileged to
go there. That physical progress is remarkable. I am not quite as
happily satisfied with China's progress on human relations and on
how the Chinese Government treats its people. These are the kinds
of things that we will be assessing in deciding whether to grant
China most-favored-nation status for another year. I think the Chi-
nese are trying to improve.

We have got a fine group of witnesses this morning.

Mr. Matsui, would you like to make a statement?

Mr. Matsui. No, Mr. Chairman.

Chairman Gibbons. Mr. Neal.

Mr. Neal. No, Mr. Chairman.

Chairman Gibbons. Mr. Thomas.

Mr. Thomas. No, Mr. Chairman.

Chairman Gibbons. OK. To start, I want to call attention to the
fact that I have 2 pages of witnesses for today, and I would like
to listen to each one at great length. But that is going to be impos-
sible. I know each one of you has a lot to say, but I would ask that
each of you please be as succinct as possible. We will hear from all
of the Members wanting to testify, and then we will go to the rest
of the witnesses.



Mr. Solomon, you are first,

STATEMENT OF HON. GERALD B.H. SOLOMON, A REPRESENTA-
TIVE IN CONGRESS FROM THE STATE OF NEW YORK

Mr. Solomon. Well, Mr. Chairman, first of all, out of courtesy
to you and the other members, I will give you my short version,
which is not all that short. But I really do appreciate very much
the opportunity to join with these colleagues here at the table to
discuss with you the subject of renewing for another year the most-
favored-nation trade status for the People's Republic of China.
Again, Mr. Chairman, I thank you for living up to your word in
holding these interim hearings on this vital subject. This hearing
is the first installment of what promises to be a protracted and sig-
nificant debate on this issue.

Mr. Chairman, a little more than 3 months from now, President
Clinton will be required to submit to the Congress his rec-
ommendation on whether or not the most-favored-nation status for
China should be renewed. As every Member knows, this annual re-
newal process has sparked considerable controversy among
friends — Republicans against Republicans, Democrats against
Democrats — because of the controversial nature of the issue.

In order to defuse the controversy last year and to give the Chi-
nese Communist Government a little more time to improve its
wretched performance with respect to human rights practices, the
President issued an Executive order setting forth the conditions
that China would have to meet in order for its MFN status to be
renewed in 1994. Much of the credit for that Executive order
should be given to Ms. Pelosi, sitting next to me, Tom Lantos, Pete
Stark, and a number of us who have constantly tried to hold the
feet of Congress and the administrations — regardless of whether it
be Republican or Democrat — to the fire on this issue.

I give the President credit for his order calling for "overall, sig-
nificant progress" concerning the following five human rights is-
sues — and I think you all should listen very carefully to this and
so should everyone throughout the world.

No. 1, adherence to the universal declaration of human rights.
Think about that.

No. 2, release of prisoners and detainees being held for the "non-
violent expression of their political and religious beliefs." And, Mr.
Chairman and members, ycu are going to hear from some wit-
nesses on that issue. Think about it.

No. 3, humane treatment of prisoners. You are going to hear
from a missionary today who is going to talk about the kind of
treatment he received as a prisoner.

No. 4, protection of Tibet's "distinctive religious and cultural her-
itage." Think about that. Many of you have been there. You know
what is going on.

Number five, noninterference with international radio and tele-
vision broadcasts into China.

Mr. Chairman, the President's order also drew indirect but im-
plicit linkage between China's MFN renewal and two more issues:
The maintenance by China of "fair, nondiscriminatory trade prac-
tices in dealing with U.S. businesses"; and, second, China's adher-



ence to the Nuclear Non proliferation Treaty, the Missile Tech-
nology Control Regime, and "other nonproliferation commitments."

And so, Mr. Chairman, the question now occurs: How is China
doing? Does China's record since its MFN was renewed last sum-
mer, pursuant to the President's condition, warrant yet another re-
newal?

Mr. Chairman, we will not, of course, have a final answer for an-
other 3 months. And if the past is any guide, we can expect to see
a flurry of activity by the Chinese Government during the month
of May, as we always do. But, Mr. Chairman, the same old gim-
micks will not be enough. I am convinced that meaningful, dra-
matic, and unprecedented steps will have to be taken by the Chi-
nese Government in order for the President to recommend in good
conscience, that MFN be renewed.

Certainly, under a continuation of the present circumstances, if
the President were to recommend a renewal of China's MFN, I
would be prepared to introduce a joint resolution disapproving his
recommendation, as I have done for the last 4 years.

Mr. Chairman and members, recent statements by senior spokes-
men for the administration itself have indicated that the Chinese
Government's human rights performance is unacceptable and does
not, thus far, meet the President's criteria.

On January 23, Secretary of State Christopher had this to say.
I would like to quote it for the record and for all to hear again: "I
would not want to mislead in any way. They" — meaning China —
"have not in my judgment made enough progress to justify my say-
ing that there has been significant overall progress." He went on
to say, "I think that at the present time they have not met the con-
ditions of the Executive order."

Our former colleague Tim Wirth, who is now the counselor to the
State Department, acknowledged just 3 weeks ago that "much
more significant progress is going to be necessary" in order for
MFN to be renewed.

And, finally, we have the testimony of the State Department's
"Country Reports on Human Rights Practices for 1993." I think Ms.
Pelosi has it here in front of her. According to that report, China's