Dilemma over dealing with Beijing

Date: 09/10/1997

FOR all the Euro-American bickering over rogue states, the world's two largest trade blocs are surprisingly united on how to deal with the biggest one of all.

Their flaming rows over investment in Iran and Cuba give way to an almost unspoken agreement to shy away from these kinds of disputes with China.

And yet, as critics point out, in terms of the number of people affected Beijing is without doubt the world's leading suppressor of human rights and fundamental freedoms. This inconvenient fact is scarcely mentioned as talks progress on China's admission to the World Trade Organisation, possibly even as early as next year.

Despite constant haranguing by the media and human rights activists, Brussels and (less so) Washington continue to support Chinese membership of the body with little reserve - as long as it makes the right kind of free trade noises beforehand.

“There is a tacit understanding about trading in China,” admitted a Washington diplomat recently. “But what could we do otherwise? The days of telling the Far East what to do are over. All you have to do is look at the US-China trade balance to see who is in charge these days.”

On this side of the Atlantic, EU-China trade (including Hong Kong and Taiwan) has been shooting up over the past six years, with exports to China rising from 18.2 billion ecu (4.7&percent; of total) in 1990 to 41.9 billion ecu (6.7&percent;) in 1996.

Imports have similarly risen from 28 billion (6.4&percent;) to 50.1 billion ecu (8.6&percent;). As with the US, the Union has a large trade deficit with the country.

This has prompted concern among some EU businesses - particularly textile-makers who fear floods of Chinese T-shirt imports - and has resulted in a number of high-profile and controversial anti-dumping measures being imposed (most recently, for example, on bicycles and handbags).

But for the most part, and especially in sectors where the Union has a clear advantage over Chinese rivals, these developments have been welcomed with open arms.

French President Jacques Chirac's sales trip to China earlier this year was just one celebrated example of European politicians' readiness to court the People's Republic. French defence firm Thomson's front-page advertisement in the Beijing telephone directory is a telling piece of evidence that they are succeeding.

Given that China's economy will probably be larger than either that of the US or the EU by 2020, with the political power that entails, this should come as no surprise.

Europe's politicians would be letting their continent down if they did not take the world's most populous country extremely seriously.

But as China climbs the ladder to superpower status, serious questions remain over whether political change will (as some believe) naturally follow economic liberalisation, or whether Beijing will stick to its traditionalist guns and even - in the worst analysis - become belligerent.

As it contemplates these different outcomes, the Union faces some real dilemmas.

If it allows China to act with impunity, it may be missing a crucial chance to nudge it towards democratic standards. To do so may be to sentence millions of people to misery.

However, if it sticks by its convictions, it could miss out on equally crucial market opportunities and sentence its own citizens to economic decline.

WHEN Denmark and the Netherlands chose to sponsor a human rights resolution against China at this year's United Nations Commission on Human Rights, both countries were frozen out by China and found little solidarity from their European neighbours.

A critical European Parliament report by Edward McMillan-Scott, who has just been elected leader of the British Conservative MEPs, was immediately denounced by China as a piece of neo-colonial interference and did EU-Chinese relations few favours.

Even were Europe, or the US, to push strongly for human rights, it is far from clear whether or not they would get anywhere.

Both American and European diplomats argue that 'constructive engagement' is often the only way of achieving real reforms. “Take Romania,” said a Washington official. “The moment that the US broke its lever on the state by removing 'most favoured nation' (MFN) status, it found itself unable to influence it. The same applies to Cuba. Losing economic leverage over China could be a terrible mistake.”

A loss of political capital would also make it much harder for the Union to put pressure on China in other important policy areas, such as in the drive to reduce CO2 emissions.

But others are not so convinced by this pragmatic attitude. “We never convinced the Soviet Union to change by being silent,” says McMillan-Scott.

Democracy organisation Human Rights Watch is furious about the Union's failure to act. Despite years of economic reform, “China has continued to tighten controls on freedom of expression and to persecute religious and political dissidents and labour activists”, it recently told the European Parliament, urging strong action now.

It added: “The relationship between the European Union and China over the past two years has been based on broken promises, and a variety of human rights concessions which China has failed to deliver.”

Should democratic injustices and a weak rule of law continue, European businesses might find themselves less than satisfied with their new partner - suffering from crippling corruption at all levels, a lack of transparent information and no opportunity for redress if things go wrong.

But perhaps both approaches can be reconciled through Beijing's bid for WTO membership. Although human rights are formally excluded from the dialogue, supporters of the process argue that many of the by-products of Chinese totalitarianism will inevitably go if it accepts WTO rules.

Before China joins - which still remains an elusive aim, despite earlier hopes that an announcement would be made this month - it will need to make substantial progress on issues such as state trading and service liberalisation. Beijing would, as a consequence, need to adopt a more stand-off style of government.

The inevitable international scrutiny that would follow membership would also make it hard for China to continue in the same vein.

“The reconciliation of market freedoms with central political control is impossible,” states the European Parliament report on China.

FINALLY, through dialogue and cooperation with other South-East Asian nations in international financial fora, the Union may find itself able to exert more influence indirectly than it ever could head-on.

But the truth is that there are no easy answers. China is riding a wave of enormous political and economic change, as Beijing continues to adjust to the post-Xiaoping era, provincial power-mongers carve out their niches in China's extended empire and trade accelerates apace.

There are simply too many variables for any one policy towards the country to have black or white effect, and every thesis on China can be countered with an equally valid antithesis.

As a result, perhaps the only real policy is no policy at all: an ad hoc set of reactions by politicians and business to unfolding events may be the only solution. After all, that is how the free market works.

Given the realities of China, the silent understanding on the part of the EU and US may be the only option available to them.