SUBCOMMITTEE ON TRADE
COMMITTEE ON WAYS AND MEANS
UNITED STATES HOUSE OF REPRESENTATIVES
HEARING ON THE RESOLUTION OF DISAPPROVAL OF ANNUAL EXTENSION OF NORMAL TRADE RELATIONS TARIFFS ON IMPORTS FROM THE PEOPLE'S REPUBLIC OF CHINA
JULY 10, 2001
TESTIMONY OF ROBERT A. KAPP, PRESIDENT
UNITED STATES-CHINA BUSINESS COUNCIL
Chairman Crane, Representative Levin, members of the Subcommittee:
Thank you for inviting me to appear before you today at this hearing on the Resolution of Disapproval whose passage would, if it became law, end for the moment the extension to Chinese imports of the same tariff treatment that we accord to all but a tiny handful of very small economies around the world.
1. Introduction
I am Robert Kapp, president of the US-China Business Council. The Council is the principal organization of American companies engaged in trade and investment with China. Founded in 1973, the Council assists its member companies in developing and pursuing effective business development strategies with China, through a combination of direct advisory services; publications including The China Business Review; a constant flow of informational events in both the United States and China, and advocacy efforts in the public policy realm, including appearances before your distinguished Subcommittee. The Council is headquartered in Washington, and maintains field offices in Beijing and Shanghai. I am pleased that our current business leadership, whose best wishes I am pleased to convey today, includes Frederick W. Smith, Chairman and CEO of FedEx Corporation, as our Chairman; Philip M. Condit, Chairman and CEO of The Boeing Company, as Vice Chairman, and former Senator J. Bennett Johnston, CEO of Johnston Development Co., LLC, as Vice Chairman. The Council enjoys the support of approximately 225 respected corporations and services of all sizes, and from most of our fifty states.
The United States-China Business Council strongly urges the members of the Subcommittee, the full Committee, and the House of Representatives to oppose the Resolution of Disapproval, and thereby to sustain -- as they have done annually for a decade and as the full Congress has done for twenty years -- the decision of the President of the United States to maintain without disruption the flow of trade between the United States and its fourth-ranked trading partner. That trade now totals no less than $120 billion annually.
The arguments for the continuation of NTR, Mr. Chairman, are familiar to most members of this Subcommittee, and indeed to most Members of Congress. Without in any way taking for granted the views of any Member on the very important vote that he or she will face on NTR this summer, I hope you will forgive me for restating our perspectives on the reasons to sustain presidential renewal of NTR in an attachment to my testimony, for those Members who wish to move through what we believe to be the unshakeable logic of NTR continuation, rather than in the main body of my remarks. (Attachment 1) I shall be happy to try to discuss any specific issues relating to NTR extension with any Member of the Subcommittee, the whole Committee, or the House itself, whether during today's hearing or in subsequent meetings.
Mr. Chairman, this hearing on annual NTR extension, for a number of reasons, is very likely to prove different in kind from those of the many preceding years in which you and your colleagues have grappled with Resolutions of Disapproval. For that reason, I would like to spend most of my time touching on themes that circumstances have not really made fully appropriate until this year.
2. Expression of Appreciation to the Subcommittee.
Mr. Chairman, we learn in working on China-related issues in Washington that unexpected surprises, usually bad ones, can happen at any time and come from any quarter, and that it is foolish to assume prematurely a final, favorable outcome of any issue involving our two nations.
Nevertheless, developments last month and last week give unprecedented strength to the belief that the end of the fifteen-year-long process of negotiating China's responsible participation as a full member of the World Trade Organization is now close at hand.
As you know, in accordance with the historic PNTR legislation approved by the 106th Congress last year, when China enters the WTO, on terms as favorable or more favorable to U.S. interests than the terms of the historic US-China Bilateral Agreement on WTO accession concluded in November 1999, the United States will extend to China full WTO-member treatment in the form of Permanent Normal Trade Relations treatment of Chinese imports. The United States will in turn enjoy full-WTO member privileges in its trade relations with China. With that, the requirement of annual renewal of standard US import duties on Chinese products required under the Trade Act of 1974 will come to an end.
In other words, it now appears very likely that this NTR hearing will be the last of its kind.
I have appeared before this Subcommittee every year since coming to Washington in the spring of 1994. I have come to know some members of the Subcommittee well, and to know and respect key members of the Subcommittee's talented and extremely hard working staff.
Please permit me to say how much my Council has valued the dialogue that we have maintained with the Subcommittee on Trade over the many years of this annual discourse, and how much I personally appreciate the courtesies that the Subcommittee has accorded to me and the US-China Business Council over the years that I have served here. I know that for most of you, China is but one of a thousand issues that fill your calendars and your minds. For me, China has been for decades the central concern of my working life. The seasonal opportunity to concentrate with this Subcommittee on issues of China's development and of our nation's relations with the PRC has been very rewarding to me -- and, I hope, helpful to you.
Our Council sincerely welcomes and encourages the continuation of dialogue with Members of Congress on the broad range of China issues -- commercial and non-commercial -- which informed policy makers must continually study. Please consider us ready, willing and able to offer information to you, convene experienced and thoughtful figures from the world of US-China business with you, join with you in meetings in your home districts or other venues, and assist you in fruitful visits to China in the future. The Council also will hope to bring interested members of this Subcommittee into its programs when appropriate, so that we can benefit from your perspectives and ideas.
3. Congress and US-China Trade and Economic Relations after PNTR
Each member of Congress who voted in favor of H.R. 4444 last year surely had his or her unique combination of reasons for doing so, but I believe at bottom most Members chose to support PNTR in the belief that full WTO-member relations between our nation and China after WTO accession would provide two core benefits to the United States:
- substantially increased opportunities for American industrial and agricultural producers, service providers and investors under the extraordinarily far-reaching accession terms our representatives had successfully negotiated with China (terms that our current negotiating team led by Ambassador Robert Zoellick further solidified in last month's crucial Shanghai negotiations); and
- long-term assurance that a China fully committed to conducting its international trade according to the world's "rules of the road" under WTO, and subject to multilateral disciplines under WTO dispute resolution, was a far better bet for America and the world trade system than a China excluded from full participation in the world trade community and thus unbound by global expectations and requirements.
In addition, many Members from both parties -- legitimately, in my view -- came to understand that the changes in state behavior that WTO's most basic principles require of China -- transparency in legal and regulatory policy, for example, or nondiscrimination in the treatment of foreign and domestic goods and services -- bear within them the seeds of enormously positive evolutionary changes in Chinese society, along lines that nearly all Americans would welcome and support. Taken together, the somewhat breathless article by one of the media's best informed commentators on China's internal dynamics and my own much more limited essay on China's growing dialogue over WTO's implications would tend to justify Members' cautious optimism on this crucial issue. (Attachments 2 and 3)
American companies doing business with China, many of them now in their third decade of the most kind of on-the-ground engagement, have a realistic appreciation of the weight of the tasks that WTO membership will soon impose on China's government and society.
They are optimistic about the elimination of market barriers and the reduction of trade-distorting practices under WTO, and thus about their enhanced opportunities for successful business with China.
Having in large measure defined American negotiating goals throughout the prolonged WTO accession negotiations, American firms also believe strongly in the necessity of China's realization of its WTO commitments as defined in the nearly finalized accession documents.
American companies accept fully the legitimacy of Congress's concerns over China's ability to implement fully its WTO commitments, and understand the necessity of continuing close U.S. observation of China's efforts and achievements in living up to its WTO obligations.
At the same time, however, recognizing the enormity of the challenges that the WTO presents to China, we feel strongly that the US government and American businesses must commit themselves to extending the hand of cooperation to China as the PRC takes the path of responsible participation in the world trading system.
This is not the time merely to stand on the sidelines with a clipboard and a pencil, filling out a compliance scorecard. Scorecarding is part of the process that lies ahead of us. But expanded, effective bilateral cooperation on key elements in WTO implementation deserve equal American emphasis.
The Chinese themselves have embarked on intensive efforts at introducing WTO concepts to legions of policy makers and bureaucrats at the central, provincial, and local levels, many of them hardly familiar with "the system" that our own country has so heavily influenced and enjoyed since the end of World War II. Hundreds of national laws have been examined, as required under WTO, for compliance with WTO rules, and where necessary are being revised to ensure formal compliance with WTO requirements. Members may find the attached brief US-China Business Council analysis of these efforts to be of interest. (Attachment 4)
Today, American educational institutions are pitching in, providing long- and short term training programs for eager Chinese government and business officials, many of whom come to the United States at Chinese government expense for the purpose of imbibing American expertise in the operation of a WTO-compliant market-oriented economy.
I myself, in cooperation with the enthusiastic and capable leaders of the Shanghai WTO Affairs Consultation Center and our own Consulate General in Shanghai, have had the pleasure of organizing a continuing series of digital video conferences on WTO issues, bringing together teams of US specialists and an audience of Chinese participants in Shanghai for lively discussions, not only on specific technical provisions in the WTO, but on the very workings of a WTO-informed political/economic/social system.
The US-China Legal Cooperation Fund, supported by voluntary contributions from member companies in the US-China Business Council and operating with no administrative budget whatsoever, continues to support worthy US-China joint programs in the field of law, in an effort to help build not only specific WTO-compliant institutions in China but to strengthen the foundations of a more equitable and accessible legal system in a rapidly changing China. (Attachment 5)
Mr. Chairman, we in the business community welcome and encourage the willingness of the Congress and the executive branch to roll up their sleeves and pitch in with us on the long-term cooperative agenda with China that will help to ensure China's fullest realization of its WTO commitments in the shortest possible time.
We believe that this is very much in the US national interest, in the interest of China itself, and in the fundamental interest of an equitable and orderly world trading system.
We hope the Ways and Means Committee and its distinguished leadership will continue to work to enhance awareness throughout the House of significance of a far-seeing and sustained effort, not just to monitor and grade China's WTO compliance, but to support and enhance China's own efforts to achieve that compliance.
4. The Changing Agenda of US-China Relations, and the Shifting Center of Congressional Interest in China
During the extended debate over PNTR legislation last year, it was widely understood that many of those in the House who either opposed PNTR outright or who were uneasy about approval of H.R. 4444 were concerned that elimination of the annual NTR debate would deprive them of a legally mandated opportunity to bring to the Congress's attention those aspects of US-China relations -- and of China's internal affairs -- that they felt needed to be aired in the interests of sound policy and faithfulness to their basic values. Thanks to the skill and creativity of key Members of the House, most notably Representatives Sander Levin and Doug Bereuter, whose names adorned a massive set of provisions included in the final bill, the Congress provided both for the extension of full WTO-member treatment to China upon its WTO accession and for the continuation of Congressional examination of certain questions of concern to Members once the annual NTR debate drew to a close forever.
Our Council stands ready to cooperate with responsible and constructive efforts of the Congressional-Executive Commission on China, established under H.R. 4444, to carry out its mandated functions.
Now that the annual NTR discussion does seem to be winding down for good, I think that even we in the business community, who have worked with this Subcommittee to support stable and expanded US-China trade relations for so long, will also feel a twinge of regret and a sense of concern.
The reason is that, for us, the NTR process offered an opportunity to re-emphasize essential points (or introduce them to new Members) about the significance and the promise of expanded economic American opportunities accompanying China's rapid economic growth, and about the vital importance of healthy bilateral economic ties to the management of the entire, highly challenging, relationship between the United States and China.
In the absence of a forum for the discussion of our massive and far-reaching economic engagement with China, the Congress is likely to turn its attention to China increasingly over questions not normally analyzed in economic and commercial terms. Ironically, we in the business community may find ourselves watching with concern if the center of legislative interest in China shifts moves too rapidly and too completely away from the economic dimensions of US-China engagement.
Therefore, we in the business community would say to members of this Subcommittee, and of the full Ways and Means Committee: don't let the promise, the achievements, and the challenges of US-China trade relations drift too far into the shadows. Help us to remind lawmakers in both parties that U.S. economic success is a core element in the definition of US national interests vis a vis China. Help to sustain the understanding, so hard-won in the 106th Congress, that our economic engagement with China contributes to American economic vitality and to progressive change within China itself. Lend a hand in making sure that easy but misleading phrases like "Profits vs. Principles" and "Trade vs. National Security" add little to responsible policy formulation, and are best met with sober Congressional understanding of the salience of effective US-China economic and commercial cooperation in advancing a broad American agenda with China, whether bilaterally, in the Asia-Pacific Region, or in global arenas.
5. Conclusion
Mr. Chairman, for literally decades, the Trade Subcommittee of the House Ways and Means Committee has had a uniquely significant role in the making of US policy toward China, thanks to the accident of a few paragraphs of Cold War legislation originally aimed at the Soviet Union and only latterly brought to bear on US relations with the People's Republic of China. The Subcommittee has facilitated wide-ranging debate, sometimes extremely heated, over our policies with regard to China. The Subcommittee's steadfast support of sensible, stable, non-preferential economic relations with China, augmented by the support of the full Ways and Means Committee, has provided indispensable guidance to the House on persistent and far-reaching policy question. Once again, we thank the Members for their hard work each year on MFN/NTR.
On behalf of our Council's companies, who have achieved so much already with China and who now view China with both optimism and sobriety, I urge you to remain interested. Engage with us, and with those who see the same questions from different vantage points. Visit China as often as you can manage. Engage with Chinese colleagues, through the established US-China Interparliamentary Exchange program or through the new Congressional Study Group on China now being set up under the leadership of Representatives Manzullo and Lantos and the auspices of the Association of Retired Members of Congress. The balance and wisdom of the Trade Subcommittee and the full Ways and Means Committee has been a true national asset in the American discourse on China, and we hope that it will remain a vital part of our national dialogue on China in the future.
Thank you.
Attachments:
- "NTR 2001: To Sing the Blues or Walk the Walk." The China Business Review, May-June 2001.
- "WTO Winds will blow away the old China," CNN.com, July 3, 2001.
- "China's Dialogue on the Coming of WTO," The China Business Review, January-February 2001.
- US-China Business Council. "Toward WTO: Highlights of PRC Implementation Efforts To Date."
- Recent press releases announcing grants by the US-China Legal Cooperation Fund
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