U.S. and Hong Kong (1985-1997)

WHITE HOUSE PRESS BRIEFING WITH:
SANDY BERGER, NATIONAL SECURITY ADVISER
CHARLENE BARSHEFSKY, UNITED STATES TRADE REPRESENTATIVE
MONDAY, MAY 19, 1997

MR. BERGER: (In progress) -- but that engagement with China, not isolation from China, is in the best interests of the American people. Engagement is not an end to itself. Engagement is a vehicle by which we can expand the areas of cooperation with China and deal face to face with the Chinese on areas of difference. And there are both. We have worked with China on issues ranging from non-proliferation where they have joined with us in the indefinite extension of the Non- Proliferation Treaty, in signing the Comprehensive Test Ban Treaty, signing and ratifying the Chemical Weapons Convention last year, agreeing to not provide nuclear equipment to unsafeguarded nuclear facilities; on security issues such as trying to achieve a more peaceful arrangement in the Korean Peninsula, and achieving the agreed framework with North Korea to freeze and ultimately dismantle their nuclear weapons program. All of these are areas where our engagement with China have produced concrete results.

There are also areas where we have basic disagreements with China -- on human rights, on issues of market access, on some of their weapons sales. But a policy of engagement is one which enables us to deal with those issues face to face directly, rather than in a way that isolates us from China.

So the first primary reason why the president made this decision is because he believes that engagement is a way to expand cooperation and to deal with areas where we differ.

Second, Hong Kong's transfer to Chinese rule this year creates another important reason for continuing normal trading relations with China. Hong Kong of course is the gateway of trade between the United States and China. It handles over 50 percent of U.S.-Chinese trade. Undercutting the island's economic footing at this moment would be a serious blow just at the time when Hong Kong needs to exert its strength and its autonomy. And we must support the economic vitality of Hong Kong during this period of transition. That's why Hong Kong leaders from a broad range of views, including Democratic Party Hong Kong leader Martin Lee, Governor Patten and others all strongly support renewal of MFN.

Third, over time we believe that engagement with China will expose China to the rest of the world, will help to promote over the long term the kind of openness that we seek in Chinese society. Commercial activity is not a human rights policy in and of itself, but that's why we have also in Geneva stood up and made it very clear that we oppose the Chinese abuses, and that we are not satisfied with Chinese human rights practices. But over the sweep of time engagement, the openness of China does clearly have and will clearly have a liberalizing effect.

And finally I would say this: Let's be clear what's at stake here. Ending MFN with China is essentially severing our economic relationship. And to sever our economic relationship is to break our political relationship with a nation that represents a quarter of the world's people, a nation whose importance to the stability and peace of Asia and the world is extremely important. We cannot dictate -- we cannot determine China's direction, but we can help to influence China's direction if we remain engaged with it. MFN is very much -- maintaining the normal trading relationship is very much a part of that process.

Let me ask Ambassador Barshefsky to say a few words, and then we'll take questions.

AMB. BARSHEFSKY: Thank you. As Sandy Berger has said, President Clinton's strategy is clear: U.S. interests are best served by a secure, stable, open and prosperous China. The manner in which we engage it will determine whether it becomes integrated into international norms and institutions or whether it will be isolated and unpredictable. To vote on MFN is a vote on how best to protect U.S. interests, not an endorsement of China's policies. Extending for China the same normal trade treatment we give to virtually every other nation on Earth will help further integrate China and promote the interests of the American people. This is as true for trade with respect to China as it is with respect to the broad range of our strategic interests.

Let me make five brief points with respect to trade issues. First, providing MFN treatment is the U.S. norm in trade. MFN means that China would receive the same trade treatment as virtually every other country. There are only six countries in the world -- six countries in the world -- with whom we do not have an MFN relationship: Afghanistan, Cuba, Laos, North Korea, Serbia-Montenegro and Vietnam. Every other country -- every other country -- has an MFN relationship with the United States. MFN confers no special benefit or special trade treatment to China.

Second, as Sandy Berger said, MFN revocation would harm Hong Kong's economy and stability. Hong Kong's economic strength is one of its chief assets in ensuring its autonomy and viability. It handles somewhere between 50 and 70 percent of U.S.-China trade, making it highly dependent on continued normal trade status with the United States.

Hong Kong authorities estimate the MFN revocation would slash its trade with the U.S. by between 20 and 30 billion dollars, with a resulting loss of as much as 85,000 jobs. This is why Hong Kong's leaders, as Mr. Berger has indicated, strongly favor renewal of MFN, as does every major political party in Hong Kong.

Third, MFN revocation would increase the prices U.S. consumers pay for basic goods and cost U.S. jobs. This could in turn provoke retaliation against U.S. exports and open the door to the China market for our foreign competitors. MFN revocation, it is estimated, would cost U.S. consumers almost $600 million annually for goods such as shoes, clothing and small appliances. U.S. exports to Chinese have more than trebled over the past decade. Those exports support more than 170,000 U.S. jobs.

Fourth, MFN revocation could derail multilateral and bilateral trade negotiations to increase our access to China's market, and could also derail China's observance of international trade rules. You know that China's accession to the WTO -- those talks have been continuing for some time. That accession would have to be based on commercially meaningful terms. It also would have to be based on China's adherence to international trade norms, norms to which China is not now bound. We are making progress in those negotiations, and insisting that China comply with basic international requirements as well as to further open its market. Revoking MFN would likely stop the progress in WTO negotiations. A second MFN revocation would jeopardize access that we've achieved in bilateral talks, including on textiles, recently in agriculture, and of course with respect to intellectual property protection where we have made significant progress.

Last, opening China's market is the best response to the U.S. deficit with China, not severing our economic relationship with China. Market opening would lead to greater prosperity in the United States and in China; MFN revocation would derail that progress. Whenever necessary, of course, we must use targeted trade rules, including our trade laws and possible threats of trade sanctions to the extent that we have specific market access concerns. We have used targeted trade sanctions effectively in the textiles and intellectual property sectors, and that tool remains available to us.

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Q: Another China question?

MR. BERGER: One last question.

Q: If the Chinese behave badly with Hong Kong after the handover, how much harder is it going to be for you to do --

MR. BERGER: Well, I think first of all --

Q: -- will you continue pushing just as hard as there is some Tiananmen-like incidents?

MR. BERGER: Number one, we obviously are watching very carefully how this transition takes place. We are making our views known to the Chinese, and we are very supportive of their living up to their obligations under the 1984 declaration.

Number two, as I said in my opening comments, ending MFN would be the worst possible thing we could do for Hong Kong, and you know I'm not going to speculate what will happen if. We will continue to watch this very carefully, and believe that it ultimately is in China's interests to live up to its obligations. Let me --

Q: Ambassador Barshefsky --

MR. BERGER: I'm going to have to leave. But let me -- we will get you the answer to --

Q: (Off mike) -- Sandy, is it a given that the vote won't take place until well after the transition -- on the Hill? You don't expect them to do this until they've watched the Hong Kong transition?

MR. BERGER: Well, the normal situation would be that we would submit the notification. We would submit on June 3rd, and then it's up to the leadership to determine what the pacing is. But they've often done it before the August recess. I don't honestly know what -- you'd have to --

Q: (Off mike) -- the administration? Would you also prefer to wait and see what happens with Hong Kong or no?

MR. BERGER: I think our view is that there ought -- we ought to continue the normal trading relationship with China, and we ought to get on with it. I mean, this is -- this annual exercise, this annual debate, is not one that necessarily serves I think anybody's interests.

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