Despite the Chinese Communist Party's push for the reintroduction of capitalist relations of production in China, the triumph of capitalism there is not yet certain. However, if US President Bill Clinton's November deal with Beijing for the US to grant permanent "normal trade relations" (NTR) for China wins the approval of the two houses of parliament — the Congress vote is slated for this week (starting May 22) — the floodgate would be opened wide to a tide of mandatory changes that could decisively roll back the central gains of the 1949 Chinese Revolution.
The imperialist powers' increasing ability to pressure China and sway its course originated in a 1978 CCP decision to "open China's door", essentially to foreign investment, which was previously banned, as well as greater foreign trade.
Whatever Beijing's motives for this decision, its implementation and the associated increasing privatisation have seriously undermined China's planned economy.
What remains of the state sector has been so marginalised that few people remain convinced that those entities which Beijing still labelled as state firms actually form part of a coherent planned sector geared to serve social needs.
That erosion of China's socialist economy will deepen if the NTR deal is pushed through because under it Beijing would surrender even more crucial controls of the economy, especially on foreign trade and domestic distribution. The deal ensures that any gains will go to US capital such that more economic decisions in China will be dictated by private profits, essentially to the benefit of US-controlled multinationals.
Horrific concessions
Even a quick scan of the key terms of the NTR makes horrifying reading. These are, at present, concessions for US capital, but once China joins the World Trade Organisation (WTO), which is likely within months, the extension of similar concessions to the other WTO members (135 at present) is almost guaranteed.
The agreement covers virtually all sectors. A crucial plank is the ending of the state monopoly, mostly within three years, on the importing, distributing and exporting of most goods — industrial, agricultural and transport, even in the sensitive areas of telecommunications, wholesale, maintenance and repair.
In agriculture, the average tariffs for US priority produce (including pork, beef and poultry) will be slashed from 31.5% to 14.5% by January 2004 or earlier. As well, the imports of bulk commodities of strategic importance (such as wheat, corn, rice, barley, soybean oil and cotton) will be relaxed, and all export subsidies will be banned.
In industrial products, the key tariff reductions include an across the board average cut to 9.4% by 2005 (from 24.6% in 1997), a cut to 7.1% on US priority goods, a cut to zero on computers, telecommunications equipment, semiconductors, computer equipment and other high technology products, a cut to 25% by 2006 (from 80-100%) for cars, with most reductions loaded up front, and cuts to 10% by 2006 for car parts, to 5% (from 12-18%) for wood, to 7.5% (from 15-25%) for paper and to 0-6.5% for the vast majority of chemicals.
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In addition, all restrictions on the quantity of imports will be eliminated progressively within five years (just two years for US priority products, such as fiber optic cable).
For all major service categories, restrictions on foreign ownership have been significantly relaxed (allowing full control in some cases), to be implementation mostly within a few years. The new privileges will be extended to all existing firms in this sector.
For banks and insurance firms, in particular, imperialist capital's long battle to secure the right to sell services to the Chinese population (in hitherto sensitive areas such as local currency transactions with Chinese firms and group, and health and pension insurance products) is largely won.
The dramatic concessions in telecommunications, a hitherto highly restricted area, will have significant social implications. For example, China's key telecommunications corridor of Beijing, Shanghai and Guangzhou, which captures 75% of all domestic traffic, will open immediately in all telecommunications services, including the internet. From a complete ban on foreign ownership in any telecommunications establishments, a 49% stake will be allowed across the board within a few years (with the cap raised to 50% in value-added paging services within two years).
Wholly US-owned firms will also be allowed to run rental, leasing, air courier, freight forwarding, storage and warehousing, advertising, technical testing and analysis, packaging services and hotels within three to four years.
The list goes on. Its scope is wide-reaching, with specific and detailed schedules for implementation and punishment for non-compliance (visit <www.uschina.org> for details). The terms are set to sweep what little is left of China's state firms off their feet, leaving little room for pretence that they could still function as part of a coherent socialist economy.
Due to past colonial or semi-colonial subjugation, the lower productivity level of a Third World country such as China makes it nearly impossible for its economic entities to compete effectively with their counterparts from imperialist countries. The removal of protection from First World competition will devastate them.
State sector under siege
A White House summary emphasises that the Sino-US permanent NTR agreement "will ensure that state-owned and state-invested enterprises will make purchases and sales based solely on commercial considerations, such as price, quality, availability and marketability". Will any room be left for social concerns?
"China has also agreed that it will not influence these commercial decisions (either directly or indirectly) except in a WTO consistent manner ... purchases of goods and services [by these firms] do not constitute 'government procurement' and thus are subject to WTO rules."
With all these generous concessions, unimaginable until a year ago, what is China getting in return? Increased exports to US? Perhaps. But as part of the deal, the US will be able to prevent any significant such rises. It will retain for 15 years the right to "retaliate" (by imposing extra duties) against "dumping" by China, which will be found guilty if its production costs are lower than those of a third country chosen by the US as a comparison.
The US can retaliate for another 12 years if the increased imports of Chinese goods have caused, or threaten to cause, "market disruption to a US industry".
Perhaps China can benefit from greater transfer of US technology? Unlikely. Until now, China has been able to set as a condition for admitting foreign investment or import licenses requirements such as transfer of technology and research capability, mandatory offsets or a prescribed local content input. But these conditions will be banned under the NTR deal.
Clinton explained to Congress in a January 24 letter, "Americans will, for the first time, have a means ... to combat such measures as forced technology transfer ... As a result, we will be able to export to China from home, rather than seeing companies forced to set up factories in China in order to sell products there."
Clinton added, "It is important to understand the one-way nature of the concessions ... China has agreed to grant the US significant new access to its market, while we have agreed simply to maintain the market access policies we already apply to China by granting permanent NTR."
For China, the benefits arising from an NTR — entitlement to much lower tariffs for exporting its goods to the US — will now be secured rather than open to scrutiny by the Congress once a year, as has been the case since 1980.
There is little doubt that the US market is important for China. About a quarter of China's international trade was deals with the US (US$85.5 billion out of US$324 billion in 1998). Moreover, China's trade surpluses, crucial especially to its foreign currency reserves, would have been turned into significant deficits if the US market was gone. China's trade surplus with the US in 1998, for example, was US$57 billion (US$69 billion in March), while its overall surplus with the world was only US$44 billion.
So, secure access to the US market is valuable, but is it worth such a high price? After all, China has been getting the temporary NTR (called "most favoured nation" until 1998) for the last 20 years.
Locking China in
There are two other possible reasons why Beijing might have been lured to this deal. Based on alleged US evidence that China sold ballistic missiles to Pakistan in 1992, Washington is said to be considering punishing China with economic sanctions. A decision was said to be due in late May-early June (Far Eastern Economic Review, May 18), but the US could have used inaction on the sanctions as a bargaining chip in the trade deal.
Secondly, the trade pact and China's entry to the WTO can be a powerful framework within which to lock China into the path of capitalist restoration. The privatisation of state firms has met considerable domestic resistance — from sections of the CCP whose interests would be endangered and from the affected workers. The rulers in Beijing, headed by Jiang Zemin, might appreciate the help that will be delivered by the WTO/NTR commitments to speed up state sector dismantling.
Whether or not these factors were part of Beijing's calculations are a matter of speculation, but there is little doubt that under the NTR pact, the jobs and living standard of hundreds of millions of people will come under further attack. The opening of agriculture is expected to have a particularly devastating effect on China's enormous rural population, as well as the country's food security.
In its November 16 edition, the Beijing Youth Daily estimated that within seven years of China joining the WTO, 14.5% (500,000) of jobs in China's car industry will disappear, as will 3.6% (10 million) of agricultural jobs.
The paper also predicted rises of 52% and 24% respectively in clothing and textile jobs, but these gains are questionable given that the imperialist countries can easily retaliate (and they have done so) using anti-dumping rules in the WTO.
Washington knows very well that the trade deal can boost China's capitalist restoration. Clinton said in his January 24 letter: "This agreement obligates China to deepen its market reforms, empowering leaders who want their country to move further and faster toward economic freedom. It will expose China to global economic competition and thereby bring China under ever more pressure to privatize its state-owned industry and accelerate a process that is removing the government from vast areas of China's economic life."
US trade representative Charlene Barshefsky was less subtle. In a March 10 address to the National Conference of Editorial Writers, she likened the trade deal to attempts of imperialist powers to force open the China market between the 1700s and the early 1900s. She added, "This [deal] is so fundamental in its fabric because the agreement attaches itself to economic life in China, not in selected treaty ports or enclaves, but economic life in China".
BY EVA CHENG