The New China Hands

The New China Hands

Corporate America spends millions lobbying to win permanent most favored nation (MFN) trade status for China, with its vast market and dirt-cheap labor force.


With little fanfare or press attention, corporate America has been quietly conducting one of the most sophisticated and expensive lobbying campaigns seen in Washington since business pushed through the North American Free Trade Agreement. The aim is to win permanent most favored nation (M.F.N.) trade status for China, whose vast market and dirt-cheap labor force cause the hearts of C.E.O.s to flutter with excitement.

China has had M.F.N. since 1980 but, because it doesn't allow freedom of emigration as called for by the 1974 Jackson-Vanik Amendment, must have its trade privileges reauthorized by the President every year. Congress can block the decision if both chambers pass a resolution of disapproval within sixty days. The stakes in the battle are enormous. Bilateral trade between the United States and China hit $57 billion in 1995, and U.S. investment in China has climbed from $358 million in 1990 to $25 billion in 1996.

To achieve their goal, the Fortune 500 companies coordinating the M.F.N. campaign have been hiring scores of lobbyists and P.R. flacks, planting pro-China Op-Eds in the press and paying for public forums stacked with panelists friendly to Beijing. "The corporate campaign has no financial limits, be it political contributions or wining and dining or paying for lobbyists," says California Representative Nancy Pelosi, a leading critic of China. "The companies don't care what they spend because the payoff to them is so enormous." Several Hill staffers I interviewed estimate that the overall business effort for China is budgeted in the tens of millions of dollars per year.

That money is buying results. On January 7, the first day of the 105th Congress, Representative Doug Bereuter of Nebraska introduced a bill that would eliminate the M.F.N. process. Instead, Bereuter–whose election campaigns are generously financed by the China lobby– would automatically grant the status to all members of the World Trade Organization, to which Beijing has an application pending. In the Senate, Democrats such as Max Baucus of Montana and Tom Daschle of South Dakota take the more direct approach. They support giving permanent M.F.N. status to China, regardless of whether it is allowed to join the W.T.O.

Last year, following a fierce battle, President Clinton's extension of China M.F.N. was approved by a lopsided margin. Even so, China's corporate allies detest the annual review expected this year in June–because it leads to an embarrassing discussion about business alliances with one of the world's worst human rights abusers.

Back in 1990, only a few dozen firms were actively lobbying on China's behalf. Today the Business Coalition for U.S.-China Trade has 800 members, mostly big companies but including trade associations and the Business Roundtable, the National Association of Manufacturers and the U.S. Chamber of Commerce.

The coalition's growth was spurred by the election of Clinton, who had criticized Bush for "coddling dictators" and promised a tougher line toward Beijing. Of course, Clinton has turned out to be as friendly to China as his predecessor, not only rubber-stamping M.F.N. renewal but, in 1994, formally delinking China trade status from its human rights record.

The Administration's warmth toward Beijing is also evident from visits made to the White House by several unsavory Chinese officials. This past December, Gen. Chi Haotian, the man who commanded the attack on democracy demonstrators at Tiananmen Square, dropped by for a cordial visit with Clinton. Early in 1996 Wang Jun, head of a Chinese arms company owned by the People's Liberation Army, attended a White House fundraiser with the President. Wang's company, Polytechnologies, once brokered the sale of M-11 ballistic missiles to Pakistan and has sold weapons to Iran and Iraq (some of the shipments to the latter arrived during the Persian Gulf War). Meanwhile, China's national security adviser, Liu Huaqiu, held lengthy meetings with Administration officials during two visits to Washington last year.

In Congress, there is far less affection for Beijing. Everyone from North Carolina Senator Jesse Helms, who views Beijing as Red Central after the fall of the Soviet Union, to Pelosi and others who criticize China's human rights record have opposed the Fortune 500's M.F.N. offensive.

China has largely allowed its corporate allies to run the M.F.N. campaign. It recently dropped several blue-chip lobby shops and now retains only one firm to curry favor in the capital, Jones, Day, Reavis and Pogue. "Business lobbyists [have] informed Chinese Embassy staff of their general strategies and approaches, but Chinese officials apparently decided that Beijing interests would be better served by allowing U.S. business groups to speak for themselves, rather than be seen as part of some coalition of forces led by the Chinese Embassy says a January 6 internal report prepared by the Congressional Research Service. Given the public's "strongly negative" view of China, it adds, Beijing's low-key approach is "probably an appropriate one to achieve China's overall objective."

While Beijing has been low-profile in approaching the Hill directly, Chinese authorities have made it known to U.S. C.E.O.s that they expect them to stand up for China in Washington. "There is an implicit but clear reward-and- punishment equation," says Ross Munro, author, with Richard Bernstein, of the new book The Coming Conflict With China. "Company investments may not fare so well if they don't take China's side in the policy debate and, conversely, their investments may fare better than ever if they do."

Prodded into action by Beijing, companies such as Allied Signal, AT&T, Caterpillar, Cargill, Motorola and the Big Three auto makers are at the forefront of the China lobby. The leader of the pack is Seattle-based Boeing, which sold one in ten of its planes to Beijing between 1993 and 1995. Last year Boeing even held one of its board meetings in China. Thomas Tripp, a Boeing spokesman in Washington, D.C., will not say how much the company is spending to win permanent M.F.N. status for China, but be admits that the issue is viewed with the keenest of interest back in Seattle. "Throwing the entire relationship on the table every year just doesn't make sense," he says. "It's like entering into a marriage very year."

The corporate lobby has pooled its resources to support groups such as the U.S.-China Business Council, which sports a $4 million budget; the Emergency Committee for American Trade, whose members' worldwide sales top $1 trillion; and the Business Coalition for U.S.- China Trade, run out of the offices of Hogan & Hartson, a leading Beltway lobby shop (from which new National Security Adviser Sandy Berger plumped for China).

Needless to say, the China lobby has plenty of access in Congress, thanks to the roughly $20 million in campaign donations that it made in the year prior to the 1996 vote on its M.F.N. standing, according to the Center for Responsive Politics. Grateful members of Congress, including Representatives John Boehner of Ohio and David Dreier of California, have shown their appreciation by meeting directly with business reps to plot the M.F.N. strategy. The precise size of the K Street battalion is difficult to determine, but it numbers in the hundreds and includes lobbyists from practically every influential firm in town. In addition to Hogan & Hartson, China's business partners have retained Patton Boggs, which has eight lobbyists assigned to the M.F.N. campaign, including Tommy Boggs (rate: $550 per hour) and Michael Brown, son of late Commerce Secretary Ron Brown; Hill & Knowlton, headed by Clinton's former chief Congressional lobbyist, Howard Paster; and Manatt, Phelps & Phillips, past home to former Commerce Secretary Mickey Kantor. These four firms alone took in at least $160,000 last year to press the M.F.N. issue, according to lobbyist disclosure reports.

At the state level, the China lobby has adapted the model used during the NAFTA campaign, with corporate "captains" assigned to lead the effort in different states and regions. To avoid creating the perception–though an entirely accurate one–that the China lobby is run by big business, the captains have set up "grass roots" coalitions of small and medium-sized businesses to meet with community groups, the media and political leaders.

The strategy has been highly successful, as seen during last year's Congressional M.F.N. vote. In Michigan, a coalition led by General Motors and Allied Signal won the votes of all but four of the state's sixteen-member House delegation, including John Conyers, one of the most liberal members of Congress. Of the nine Representatives from Washington State, Boeing's backyard, only conservative Linda Smith opposed M.F.N. status for Beijing, in large part because of China's record on forced abortions. In New York, Nita Lowey boarded the China train after being personally lobbied by I.B.M., while Harlem's Charles Rangel was won over by Wall Street. In Florida, Motorola and United Technologies lined up support from sixteen of the state's twenty-three votes in the House.

The China lobby also counts on support from dozens of former government officials–from the commercial, diplomatic and military establishments–who write pro- China Op-Ed pieces, send letters to members of Congress and personally lobby on the Hill. Many of these officials have money at stake in China, though this is rarely noted when they shill for Beijing.

Former Secretary of State Henry Kissinger heads Kissinger Associates, which opens doors for U.S. companies seeking business in China. Last year, David Weiskopf left the Commerce Department, where he promoted trade with China, to take up residence as managing director of Kissinger Associates, where he helps perform a similar function. Former Ambassador to China Leonard Woodcock advises Bell Helicopter and Chrysler on their China operations. Lionel Olmer, a Commerce official under Ronald Reagan and now adviser to the U.S.-China Business Council, advises U.S. companies that export to China while simultaneously lobbying against restrictions on high-tech exports to Beijing.

Two especially active friends of China are Alexander Haig and Brent Scowcroft. The former, a Secretary of State under Ronald Reagan, has helped United Technologies work the China market and last year furiously lobbied Congress to extend China's M.F.N. standing. Haig's lack of equilibrium–which frightened the public during his years of public service, helping to create the nuclear freeze movement–has not served Beijing well. "Haig aggressively berated anyone who dared oppose his views and scoffed at their intelligence," says a source in Congress. "When [one member of Congress] suggested that Taiwan be admitted to the W.T.O. ahead of China, he went absolutely ballistic."

As a member of the National Security Council, Scowcroft in 1989 traveled to Beijing shortly after the crack- down at Tiananmen Square for consultations with Chinese leaders (who honored his arrival by pummeling a group of student demonstrators). After leaving government, Scowcroft went to Kissinger Associates and now heads his own consulting firm, The Scowcroft Group, which develops "market entry strategies" for companies seeking overseas opportunities. Scowcroft refuses to divulge his client list, but he shares office space–and until recently phones–with Wiley, Rein & Fielding, a D.C. law firm that represents several companies with interests in China. Last October Scowcroft traveled there, joining Chubb Corporation C.E.O. Dean O'Hare at a meeting with Premier Li Peng. According to an account in the Chinese press, Li "expressed his appreciation for the prolonged efforts Scowcroft has made in helping to develop Sino-U.S. relations," while Scowcroft assured his host that he was "willing to make further efforts" for said cause. Scowcroft also sits on the board of at least two corporations with big interests in China, Northrop Grumman and Qualcomm, and is a trustee of the business-funded Asia Pacific Policy Center, a right-wing Beltway outfit that promotes closer ties with Beijing.

None of this stopped Scowcroft from offering himself up as a dispassionate China observer. He has testified on the Hill about the importance of close ties to Beijing, briefed members of Congress on M.F.N. at the invitation of the Heritage Foundation and spoken at public events where he reiterates his positions.

With polls showing that Americans overwhelmingly value human rights above trade with China, Fortune 500 companies have also spent lavishly to influence public opinion secretly. "The companies [with big investments in China] all face P.R. difficulties," Kenneth DeWoskin, a professor at the University of Michigan Business School and consultant to several auto companies that do business in China, says in explaining the campaign. "That requires an ongoing effort to educate the public and make people feel positive about U.S. investment there."

Handling the public-opinion whitewash is Allan Myer of Hill & Knowlton. Myer–who declined to be interviewed for this story–has retained pro-China academics to draft newspaper Op-Ed articles and speak at public events. He has also helped produce Panglossian videos and brochures that laud China and urge expansion of U.S. trade with Beijing. DeWoskin says the companies paying for the campaign distribute such material "through their normal P.R. channels," show them internally to workers and middle managers and release them in their home communities. Some of the promotional material has also been distributed to educational organizations and individual teachers, according to Munro.

A final element in the China lobby's campaign is the sponsorship of various public forums where the U.S.- China relationship is discussed. This April the Council on Foreign Relations will hold a two-day conference, "From Bicycles to Beepers: The Politics and Economics of Business in China," complete with workshops on investment possibilities and how to set up joint ventures. Much of the money for the affair is being provided by U.S. companies with investments in China.

AT&T, the Ford Foundation, G.M., Boeing, Cargill and Du Pont paid for a conference on China at Columbia University last November. Participants included Robert Kapp of the U.S.-China Business Council; Douglas Paal, a member of the National Security Council under George Bush, who later suggested that Warren Christopher be fired because he was not accommodating enough toward Beijing; and of course the omnipresent Brent Scowcroft.

Conference participants worried that "the images of the June 1989 killings around Tiananmen Square remain…vivid for most Americans," and predictably concluded that the United States "should promptly lift post-Tiananmen economic sanctions on China that have become counterproductive or place an unnecessary burden on U.S. business."

The U.S.-China Business Council portrays in lurid detail the disaster that awaits if M.F.N. status is cut off. Such a "declaration of economic war' it predicts, would lead to further ballooning of the U.S. trade deficit and the layoff of tens of thousands of U.S. workers. The council further maintains that human rights improvements in China will come naturally, as a result of increased trade.

Meanwhile, the annual U.S. trade deficit with China has reached $35 billion, second only to the deficit with Japan. The true concern of American business–which in 1995 exported more to Taiwan's 21 million people ($19 billion) than it did to China's 1.2 billion people (under $12 billion)–is not protection of U.S. jobs but access to China's vast supply of cheap labor. Boeing shut down a plant in Kansas and transferred operations to a factory in Xian, China, where workers are paid $50 per month. Motorola expects to have 12,000 Chinese employees by the year 2000.

Equally cynical is the China lobby's expressed concern for human rights, which have greatly deteriorated there even as trade with the West grows. "Not many multinational businessmen care if the country they locate in is a democracy or a dictatorship," says Kevin Kearns of the U.S. Business and Industrial Council, whose members have been hurt by Chinese imports and which opposes M.F.N. status for China.

Others worry about how U.S. companies have agreed to transfer sensitive technology in return for access to the China market. McDonnell Douglas once closed a deal to build jets in China by throwing in tooling technology used by civilian industries but that also has military applications. According to The Seattle Times, China illegally diverted the equipment for use in missile programs. On another occasion, McDonnell Douglas secured a jointventure agreement with a state-owned aviation company by providing, in the words of The Wall Street Journal, "enough technical data to fill a library." Other companies have followed suit. According to the Journal, "No multinational, be it AT&T Corp. or General Motors Corp., can expect an entry pass without divulging technology early and often."

In the end, the China lobby's money carries much weight, and final victory on the M.F.N. issue seems to be nearing. First is the problem of Hong Kong, which reverts to Chinese control on July 1. Many members of Congress may not feel comfortable voting for permanent M.F.N. status for China without waiting to see if Hong Kong blows up after the changeover.

The other problem for the new China hands remains the public hostility to Beijing. Indeed, it's remarkable that active opponents of M.F.N. status for China–little more than a few unions and environmental groups–have been able to wage such an effective battle in the face of the Fortune 500 campaign. "The fact that they still haven't succeeded shows how strongly human rights concerns have resonated in this debate," says one Hill staffer from the anti-M.F.N. camp. "If it weren't for that, we would have been squashed long ago."

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