By and  on May 27, 1994

WASHINGTON -- President Clinton's announcement Thursday that he would extend China's most-favored-nation trade status for another year evoked welcome sighs of relief from retailers and importers. The President also followed the urgings of many in industry by saying he would delink human rights from the annual extension of MFN.

Clinton said he would pursue other avenues to improve human rights in China, such as increased Voice of America broadcasts and banning the U.S. importation of various Chinese-made assault weapons and ammunition.

Noting that China did not meet all the human rights goals that he set a year ago as a condition for future MFN renewal, Clinton said it had met some of them and that U.S.-China trade and political ties are too important to be ruptured. This rupture, he said, would have occurred if MFN had been revoked.

Thus, he said, the linkage to human rights had "reached the end of its usefulness."

The announcement of the MFN extension means that imports from China will continue to carry the same duty rates as those on imports from most other countries. Revocation would have seen these duties triple or quadruple for apparel.

Clinton called for the creation of a code of ethics for firms doing business in or with China -- similar to those adopted in the Eighties by firms operating in South Africa -- in which businesses pledged not to employ people at less than a minimum wage, prohibited the use of slave labor and guaranteed workers the right to express grievances to management.

Tracy Mullin, National Retail Federation president, said, "America's retailers applaud President Clinton's decision."

She said, "It will ensure that American consumers can continue to purchase the high-quality, affordable products China provides."

"This removes a sword of Damocles that hung over the head of anyone doing business in China, or wishing to do so," said Laura Jones, U.S. Association of Importers of Textile and Apparel executive vice president.

"The annual MFN renewal battle dissuaded some exporters and importers from doing business in China because it became too risky," she said.

Clinton acknowledged, though, that the Jackson-Vanik Amendment -- adopted in the Seventies, initially against the Soviet Union -- still requires he certify June 3 that China permits free emigration, or MFN automatically will expire.Robin Lanier, the International Mass Retail Association's international trade vice president, pointed out that this law still is a snag in worry-free sourcing from China.

Frank Kelley, Liz Claiborne's international trade vice president, said nevertheless "the bottom line is that you can't replace China" as an apparel resource.

Not greeting the news happily, though, was the American Textile Manufacturers Institute, reissuing a statement it made before Congress in February. It charged China repeatedly violates U.S. law via "massive piracy of American intellectual property" and does not provide sufficient access to its market for U.S. goods.

However, Seth Bodner, president of the National Knitwear & Sportswear Association -- which has sought to curtail Chinese and other Far Eastern imports whenever possible -- said he could not disagree with Clinton's decision, saying he doesn't believe trade sanctions would have much effect on changing China's human rights policies.

Bodner, though, chided the Clinton flip-flop on the issue from last year, when the President said China had to meet about 10 human rights benchmarks or lose MFN status. Clinton's announcement Thursday "shows the Chinese leadership that we're not serious, and they can stick their finger in the president's eye and get away with it," he said.

Michael Rothbaum, president, The Harwood Cos., New York, and a past chairman of the American Apparel Manufacturers Association, said he did not believe future White House decisions on MFN renewal for China will adversely affect sourcing from there.

"The perception is that it would be extremely difficult for Clinton to deny China MFN status because of the tremendous dislocations this would cause, and that's why there's been very little hedging on the part of buyers in either the retail or manufacturing areas," said Rothbaum, whose firm makes apparel in both the U.S. and Central America.

"Besides," he added, "many of our good trading partners' records on human rights are so dismal that China looks like a white knight by comparison."

On Capitol Hill, Clinton's decision likely will stand, but not without some resistance. Congress does not have to vote on Clinton's recommendation for it to take effect but likely will be considering as matter of form a plan to deny China its trade benefits. At least one member, Rep. Gerald Solomon (R., N.Y.), already has introduced a bill to withhold MFN from China, yet a Solomon staffer admitted it would not pass.Also, a bill that would put conditions on China's trade benefits is being drafted by Rep. Nancy Pelosi (D.,Calif.), a long-time critic of China's human rights policies, Senate Majority Leader George Mitchell (D., Maine), House Majority Leader Richard Gephardt (D., Mo.) and Rep. David Bonior (D., Mich.). This measure, however, would have to be considered in the House by the Ways and Means Committee, and action is unlikely, because of the overriding sentiment among panel members that MFN should be extended and because of the panel's already full agenda.

Sen. Max Baucus (D., Mont.), chairman of the Senate Trade Subcommittee and a strong advocate of unrestricted trade with China, said after Clinton's announcement, "It's highly unlikely any conditions legislation will be vigorously pursued by Democrats because it's unlikely they'll want to embarrass their Democratic president. A conditions bill would not pass the House or the Senate."

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