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China tech wriggling may snag PNTR

Silicon Valley needn't pop the Champagne corks just yet

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The triumph of hope over experience was again enacted in Washington Tuesday evening, as US President Bill Clinton signed a bill granting permanent normal trade relations (PNTR) to China during a ceremony on the White House South Lawn.

US Secretary of State Madeleine Albright and a handful of Congressional boosters took turns introducing the Prez, gushing with enthusiasm over spectacular fantasies of vast commercial jackpots, such as those with which the West has tantalized itself obsessively, and fruitlessly, for the past two centuries.

Interestingly, it was the President who sounded a bit gloomy, saying that he "ought to point out that our work's not over when I sign the bill. For China must still complete its [World Trade Organisation (WTO)] accession negotiations, and live up to the agreements it has negotiated with us and our partners, before it can join."

"Opening trade with China will not, in and of itself, lead China to make all the choices we believe it should," the President observed.

He was perhaps recalling that as he signed the bill, he had also dispatched US Trade Representative (USTR) Charlene Barshefsky to Beijing, on a mission to persuade the Chinese to honour a number of promises on which PNTR and WTO membership depend.

At issue are recent Chinese efforts to limit foreign investment in Internet and telecomms ventures, and several items related to manufacturing and agriculture.

The US tech sector has been brightly enthusiastic about PNTR, anticipating with glee the imminent delivery of a vast market. "If the world is rapidly becoming a digital planet, China is its new frontier," Information Technology Association of America (ITAA) President Harris Miller has said.

But it will take a bit more than cheerful incantations to conquer the everlasting Chinese inclinations towards exploitation, political corruption and outright mercantilism. Such optimism would be fine if the Chinese government could be trusted to honour the agreements they make; but the basic negotiating tactic is to offer a concession calculated to extract a reciprocal concession from a foreign opponent, and then cancel the original offer once the opponent has made a commitment based upon it.

Westerners, the Chinese have long known, have a bizarre tendency to follow written agreements which they've signed.

It's quite possible that a bit of tough talk from the USTR will result in another written assurance from Beijing on these issues, which China can violate later, after PNTR takes effect and it's been admitted to the WTO. Undoubtedly the Chinese are calculating that once admitted, they can't be forced to follow the rules, as international big-business lobbying will provide an adequate shelter from serious trade retaliation.

And of course, even after WTO membership is settled, there still remains a bewildering maze of regulatory back channels with which the Chinese government can thwart anything threatening to resemble free trade. So we'll just wait and watch a bit, before we launch our consumer electronics distribution operation and branded ISP in Shanghai.... ®

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