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Administration Will Ponder Ways to Cut China's MFN

By Thomas W. Lippman
The Washington Post

The Clinton administration is studying ways to limit the impact on U.S. business and the Chinese private sector if President Clinton decides to curtail China's trade privileges over human rights issues, senior administration officials said Thursday.

Rather than making an "all or nothing" decision on revocation of trade privileges, the administration might impose trade sanctions only on certain goods or industries, officials said. The aim would be to maximize the economic impact on the Chinese government, which owns its country's resources and heavy industries, while sparing sectors of the economy not deemed responsible for human rights abuses, officials said.

Additionally, the administration has begun reviewing scheduled visits by Chinese military, scientific and trade delegations to decide whether they should be allowed to take place in coming week, officials said.

A State Department official said the administration's internal discussion of whether to try to revoke China's "most favored nation" (MFN) tariff status for some goods or industries and not others is in a very preliminary stage. But he added that U.S. officials wanted at least to "signal that we're looking for a way to pull the trigger" on trade sanctions if necessary.

Another administration official said development of such a plan might convince those who doubt that the administration would sacrifice the important trading relationship with China because of the human rights dispute.

President Clinton suggested such a differentiated approach in campaign speeches accusing President George Bush of coddling China, but it would fall short of the full revocation of China's MFN status threatened by Clinton last year in an executive order linking the trade and human rights issues.

Administration officials appeared Thursday to be trying to demonstrate that Secretary of State Warren Christopher did not back down on human rights during his ill-starred visit to Beijing last weekend.

"I pulled no punches and I yielded no ground" in talks with Chinese leaders, Christopher told a House Appropriations subcommittee Thursday. He said the Chinese, who had been getting "mixed signals" about the administration's commitment, now understand clearly that their MFN trade status is in jeopardy over their human rights performance.

Christopher is to report to Clinton by the end of May whether China has made "significant overall progress" in the past year on seven specific human rights issues.

If his report is negative, Clinton has said he will not extend China's MFN status, which allows Chinese goods to enter the United States on an equal footing with goods from other friendly nations. Revocation of MFN would subject Chinese-made products to stiff tariff duties, jeopardizing one of the fastest-growing markets for U.S. trade. Christopher said China would be ill-advised to call the Clinton administration's bluff.

"It's going to hurt their economy," he said. "We take 38 percent of their exports. They have over a $20 billion surplus with us. So it would have a significant impact on China. Everyone talks about the impact on the United States if we have to revoke MFN. No one seems to realize that it's going to have an impact on China."

Much of the U.S. business community and some business-oriented officials in the administration, especially at the Commerce Department, oppose the linkage of trade and human rights. But Christopher and other officials said they are confident that they have the support of Congress -- and that the Chinese now understand that. He and other officials said the Chinese leaders also understand that they have strategic and political reasons, as well as economic ones, for maintaining good relations with the United States. With the deadline looming, U.S. policy may look like dangerous brinkmanship, one senior official said, but there is no alternative because "the only way you get anything out of the Chinese is to be tough with them."

Administration officials have labored all week to overcome what they saw as excessively negative press coverage of the Beijing visit. Several senior officials said Christopher spoke bluntly to the Chinese and made more progress in the talks than the Chinese have admitted publicly.

In his May 28 executive order making China's MFN renewal conditional upon human rights progress, Clinton listed seven specific areas of concern. Christopher said Thursday that China has made some progress on the only two of the seven that are "mandatory" -- allowing freer emigration and compliance with a China-U.S. agreement banning the export of goods made by prison labor. On those points, "compliance seems to be feasible," Christopher said in a telephone interview last night.

The other five conditions, including an end to jamming of Voice of America broadcasts and release of political prisoners, are matters of judgment, Christopher said. But he said making this distinction was merely "descriptive" of the president's executive order and should not be read as a signal of a softened position on the five issues.

In the interview Christopher rejected the notion heard among many critics of the China policy that the administration now regrets drawing the human rights line in the sand and is looking for a way out.

"It's exactly the marker we intended to draw," he said. The language requiring "overall significant progress" was deliberately imprecise, he said, because "you can't arithmetically calculate this." The language was adopted after consultation with Congress, he said, and Congress will have to be satisfied with the degree of compliance before China's MFN status can be extended.