Week of May 26, 2000

SUMMARY:On May 24, the U.S. House of Representatives approved the long debated legislation on whether to grant China permanent normal trade relations (PNTR) status by a larger margin than expected. The bill, passed by a vote of 237-197, will now move onto the Senate where it will be voted on in June. Senate approval of the bill, thought to be virtually assured, would end the 20-year old annual review of China’s trade status, enact the 1999 trade agreement signed between the two countries that will grant U.S. businesses greater access to China’s markets, and be a symbolic gesture of U.S. support for China’s upcoming entry into the World Trade Organization (WTO).

The PNTR legislation passed through the House by a larger margin than expected, finding the backing of 73 Democrats and 164 Republicans. While the legislation has shown the solidarity of many groups on favor of the measure, primarily business groups and pro-business policymakers, it has also has exposed the divisiveness among Democrats who have been increasingly split over trade bills. In the PNTR vote, Democrats who voted in favor of the legislation, risk loosing support from labor groups, who lobbied strongly against the trade bill on grounds that increased trade ties with China would undermine the U.S. position on human rights violations in the country and endanger the jobs of thousands of Americans. In the weeks leading up to the House vote, President Bill Clinton and his administration were actively lobbying the support of wavering Democrats considered vital for passage of the bill. While President Clinton has been accused of "horse-trading" or granting special favors in return for an affirmative vote on PNTR from lawmakers, White House officials claim that the planned establishment of a special human rights commission and measures to protect against losses of U.S. jobs in certain U.S. economic sectors, were the key reasons for the support of more than a sufficient number of Democrats.

White House officials claim the bill’s eventual passage could mark a turning point in Sino-U.S. relations, making comparisons with President Richard Nixon’s historic 1972 visit to China. While eventual passage of the bill could contribute significantly to President Clinton’s historic legacy, a major issue of how to implement all the terms of the terms of the trade agreement will take center stage.

SUMMARY:Official reaction in China to the U.S. House of Representatives passage of the permanent normal trade relations (PNTR) bill was predictably positive. The Chinese Trade Ministry praised the bill as a measure that would "help the healthy and stable development of bilateral trade and economics cooperation with China." Even though increased U.S. and other foreign competition in Chinese markets resulting from enactment of the 1999 Sino-U.S. trade agreement is expected to result in major short-term unemployment, news of the House passage lifted Chinese stock markets. Despite the optimism, Chinese trade officials also expressed their concern of the human rights provisions that were made to the PNTR bill, calling them "unacceptable" and that China "reserves the right to react on the issue in the future."

Many of China’s neighbors in China welcomed the House approval of PNTR. Though economists in several Asian countries foresee greater competition for low-tech exports (such as textiles) to the United States resulting from increased U.S. access to China’s markets, the reaction was overwhelmingly positive. Taiwan officials welcomed the votes, claiming it would improve prospects for both sides of the Taiwan Straits to join the World Trade Organization. Similarly, members of Hong Kong’s business community were satisfied with the outcome of the House vote, stating that improved U.S. economic ties with China will increase chances for cooperation in joint-ventures between Hong Kong and foreign companies. Japanese officials who have for a long time supported China’s accession to the WTO, called the vote as a "big step forward." Representatives from several other Asian countries including Austrialia, New Zealand, Singapore, and South Korea.

SUMMARY:China plans to conduct routine military exercises in a 160 square kilometers area in waters off of Fujian province from May 25 to 31. Described by China’s defense minister as "routine artillery firings", these drills have sent Taiwan’s stock market to fall for the fourth consecutive session.

Taiwan authorities have asked the public to remain calm and not to worry about the Taiwan controlled frontline islands near the Mainland. Furthermore, Chen Shui-bian, in his May 20th inauguration speech, seemed open to continue stalled cross strait talks with China about possible future reunification. However, Beijing has always been suspicious of Chen and reiterated it would not negotiate with Taipei as a sovereign entity. China still claims the right to invade Taiwan should it move towards independence.

SUMMARY:On Saturday May 20th Chen Shui-bian was inaugurated as Taiwan’s second elected President. In his inaugural speech he repeatedly emphasized China and Taiwan’s historical connections declaring, "The people across the Taiwan Strait share the same ancestral, cultural and historical background." However, he also took care to preserve Taiwan’s separate identity and refused to accept Beijing’s "one China principle", which would make the island part of China.

Though Chen has recently softened his independence rhetoric, China still believes his Saturday speech was insincere and purposely vague. Furthermore, Beijing continues to mistrust both Chen and Vice President Annette Lu and have threatened to use force against Taiwan in order to prevent the island from declaring independence or stalling indefinitely on reunification plans. Chen, on the other hand, has stated that Taiwan will only seek a referendum on independence if China attacks the island.

Although cross strait tensions have remained high over that past few months, Chinese officials have projected their "pragmatic attitude" by stating they would give Chen "a long time" to work on the reunification issue. Moreover, on Monday May 22, Chen journeyed to the small island of Kinmen to announce his willingness to consider opening up the "three links" between China and Taiwan. These include direct trade, postal and transportation links. It is estimated that some 40,000 Taiwanese companies have invested $40 billion dollars into China since the 1980’s. Breaking the ban on the links would no doubt further enhance both economies and help to improve relations.

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The U.S. and China This Week

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Last updated: 26 May 2000