The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

United States:
China - The AFL-CIO's Paper Dragon

Jul 21, 2000

"Passing Permanent Normal Trade Relations [PNTR] will open China's markets to us and will promote the cause of change in China." With these words, uttered in his last "State of the Union" message, President Clinton laid out his case for fully regularizing all commercial relations with China. Five months later, when the U.S. House of Representatives voted on May 24 to pass PNTR, Secretary of State Madeline Albright reiterated the claims that had by then become a litany of the Clinton Administration: "As important as this vote is to the economic well-being of America and to sustaining the economic growth that we have experienced in these past eight years, it is just as important to our national security."

The media, of course, added to the verbiage, speaking of China as having the potential to become the new "megapower of the 21st century" or, at the very least, being able, with its one and a quarter billion people, "to expand the global consumer market for American companies." On the other hand, the AFL-CIO condemned the deal as ensuring the loss of jobs in the U.S.: "hundreds of millions of Chinese workers will compete for manufacturing jobs with American workers at a fraction of U.S. labor costs."

The Changing U.S. Strategy toward China

Despite all the hyperbole, the House vote, which has yet to be confirmed by the Senate, was just one more step on the long and tortured path that U.S.-Chinese relations have followed for the last 31 years. It was in 1969 that the U.S. opened the first quiet breach in the total economic blockade it had long imposed on China. In 1950, preparing to fight a war in Korea, the U.S. was confronting a regime in China which had taken power by resting on a vast revolt of the peasantry, a regime which did not prostrate itself in front of every demand made by the imperialist powers. Thus, the U.S erected a wall around China in 1950, cutting it off from the rest of the world for almost two decades, pretending that the defeated nationalist forces of Chiang Kai-shek, sitting on Formosa, still ruled China.

But by 1969, unable to defeat the Vietnamese and fearing the widening of that war into other parts of Southeast Asia, as well as the possibility that the revolts then shaking American cities might become more profound, the U.S. state reversed its policy toward China. It quietly moved to re-establish relations with China, as part of a settlement of its problems in Viet Nam and, more widely, throughout Southeast Asia.

In 1971, then President Richard Nixon made the startling announcement that his envoy Henry Kissinger had carried out a secret trip to China, one result of which was to give "China's seat" at the United Nations to ... China. Up until that time, the seat had been occupied by Chiang Kai-shek's Taiwanese regime. In 1972, Nixon himself went to China, issuing a joint communique, the main import of which was carried in the statement: "The United States acknowledges that all Chinese on either side of the Taiwan Strait maintain there is but one China and that Taiwan is part of China. The United States government does not challenge that position."

Nixon had given the signal that the U.S. would no longer impose the blockade on China that had prevented other powers from developing commercial relations with China. Almost immediately, Japan, then most of the other main imperialist powers, began to recognize or at least establish commercial relations with China.

In 1975, Kissinger proposed to the Chinese during another secret trip that the two countries should exchange intelligence information, particularly relating to the Soviet Union; he also let it be known that China would be allowed to buy the military hardware it wanted from Britain. The U.S. had begun to play its "China card" against the Soviet Union, as well as against movements in other underdeveloped countries.

In early 1978, Zbigniew Brzezinski, Jimmy Carter's national security adviser, held secret talks in China, during which he offered to provide China with advanced U.S. arms and military material, selling them to a U.S. ally, who then would re-sell them to China. At the end of the year, China announced a series of economic "reforms" whose main import was to open the previously state-controlled economy to allow some private investment, including from outside the country. At the very same time, the U.S. agreed to establish full diplomatic relations with China as of January 1, 1979, withdrawing all diplomatic recognition from Taiwan. (The U.S. continued, however, to supply Taiwan with the vast majority of the military equipment and weapons it wanted, thus continuing to hold Taiwan over China's head.)

Permanent, Temporary – What's the Difference?

In January 1979, Vice-Premier Deng Xaioping went to Washington, where a number of joint economic projects between American businesses and China were negotiated. A few months later, the two countries signed a one-year bilateral commercial accord, the famous "Normal Trade Relations," which has been renewed annually ever since – under the Republican administrations of Reagan and Bush, as well as the Democratic ones of Carter and Clinton.

When, in May of this year, the House voted to make those "normal trade relations" permanent, it was simply acknowledging the reality of the last two decades. PNTR was hardly the landmark some folks claimed for it, nor did the vote really make it more permanent. As if to demonstrate the point, Clinton, in an April 6 White House paper, declared: "Congress can, at any time, choose to revoke PNTR, if circumstances warrant and Congress is willing to forego WTO benefits."

Certainly, the last 21 years have been filled with stops and starts, in some cases abrupt, as after the 1989 Tiananmen events, which were bandied about by the right wing in the United States as a way to put a brake on any further development of Sino-American relations. But even then, the halt was more apparent than real, orchestrated as it was for the interior political situation in the U.S. While no U.S. president travelled to China in the eight years following Tiananmen, "normal trade relations" continued to be renewed ever year. The U.S. might continue to play its "Taiwan card," vis-a-vis China, inviting Taiwanese President Lu Teng-hui to the U.S. in 1995 for a state visit, for example, and furnishing Taiwan with weapons. Beijing, for its part, was certainly able to rattle a few missiles in Taiwan's direction, as it did after Lu's visit. Nonetheless, the U.S. continued to sign new commercial treaties with China, and economic relations between China and Taiwan not only continued, but developed more openly. In fact, Taiwan is China's most important trading partner today, as well as the biggest source of "foreign" investment in China.

By May of this year, when the House "permanentized" the "normal trade relations," the U.S. was China's third most important trading partner, coming after only Taiwan and Japan. China was already the fourth most important trading partner of the U.S., surpassed only by Canada, Mexico and Japan.

There is no doubt that China and the U.S. had already woven a multitude of important and durable economic ties, long before the House stamped "permanent" on China's application.

China: After Three Decades of Going It Alone

China and the U.S. did not weave these ties in precipitous fashion. The internal political situation in the U.S., which had been fed on anti-communism and inflamed by the picture of China as a new "yellow peril," militated against it. China, for its part, was not ready to give in to every demand made by imperialism just because the U.S. had changed its mind after 30 years of isolating China and forcing it to engineer its own development.

China was forced to give up its monopoly over foreign trade in order to open the trade circuits in 1979, and it soon thereafter ceded a series of concessions designed to attract foreign investment. But, it nonetheless continued to protect its own developing industry, borrowing from what the major capitalist countries had done in the course of their development; that is, it imposed a series of tariffs and trade quotas, as well as a large number of regulations which limited the ability of foreign capital, particularly finance capital, to set up shop as it wanted.

It was not simply a question of the will of the Chinese leaders – although that certainly played a role. The Chinese state, by taking over large sectors of the economy, had given itself the means, at least to some extent, to stand up to the demands of imperialism, in a way that India or Indonesia, for example, did not.

However, when the regime of Mao Zedong made the choice to nationalize industry, take over other sectors of the economy and break with the market, it did not make this choice voluntarily. The choice was forced on the new leaders of China by imperialism, which had isolated China and even attacked it militarily, as well as by the capitalists, both foreign and Chinese, who sabotaged its economy. China had, nonetheless, continued to show respect for this market. It continued to pay the debts of the old regime, and to pay vast sums of money to the Chinese capitalists, whose property it took. In this way it did not challenge the class basis of the state.

This was contrary to how the Soviet Union had broken from the imperialist order. For in expropriating the capitalists, the leaders of the proletarian revolution refused to pay off the old Czarist debts. This was a class choice, reflecting the proletarian nature of the Russian revolution and the state which it established. These were choices which no one else had ever made before, nor since, including in China.

Nonetheless, the Chinese leaders, who were not ready to prostrate themselves in front of imperialism, were ready to try to resist the pressures of imperialism by establishing state ownership of industry. They were thus able to direct capital into those sectors most necessary for the overall development of the economy: electrification, roads and transportation, agriculture, raw materials, and some basic industries which had not existed. In the first three decades after the 1949 revolution, agricultural production doubled, while industrial production increased at a rate of nearly 10% a year during these three decades. This did not allow China to catch up with the imperialist powers, a goal which China had at one time proclaimed as its basic aim. The industrialized powers never developed their economies based only on the wealth they accumulated inside their own countries, but on the extraordinary amount of wealth they stole from the less developed areas of the world. And the wealth stolen from China itself lay in the banks of the imperialist powers. Nonetheless, state ownership did allow China to develop its economy during the first three decades of its existence, in a way that India, for example, still caught in the world market, did not.

With direct imperialist plunder held at bay, China was able to overcome some of the worst impoverishment that had been imposed on it by a century and more of colonial rule. The state was able to set up a number of programs improving the lot of the population – for example, free medical care, campaigns to overcome illiteracy, as well as the extension of public education, particularly in the countryside. Illiteracy decreased from 80% of the population in 1949 to only 25% in 1978; life expectancy increased from less than 40 years in 1949 to almost 65 years in 1978.

Of course, these statistics, given the problems of measuring such things in a country as large and yet as underdeveloped as China, can only loosely approximate the situation. Nonetheless, they demonstrate the trend during these years.

But the more China went beyond the first stages of development, the more it found itself in a trap. Isolation from the rest of the world, which had allowed China to develop its economy somewhat, was threatening to choke that development off by the end of the 1970s. China desperately needed advanced technology, machinery and other industrial goods, as well as essential raw materials – all of which China had to get from the rest of the world. Thus, even while keeping a tight control over what could be invested and what traded, the regime once again began to seek ways to enter the world market.

China has sought for years to be accepted into the General Agreement on Trade and Tariffs (and now into the World Trade Organization). It first raised the question in 1980, and made formal application to join GATT as a full member in July 1986. But the U.S. and other countries delayed China's admittance as a way to force China to give up the controls it had erected to protect its fledgling economy.

The U.S.-China WTO Accession Agreement

The vote this year by the U.S. Congress granting permanent normal trade status for China will finally open the doors for China's move into the WTO. Formally, the vote dealt simply with relations between the U.S. and China. But, as every one understands, just as it has been the U.S., the world's dominant imperialism, which has barred China's full entrance into the world marketplace in the past, so now it is the U.S. which will decide when the bars in front of the door are to be dropped.

The Congressional vote was the formal recognition that China had given what imperialism had been demanding during the last two decades. The extent of what China ceded was laid out in the agreement China signed last November with the U.S., the so- called "Bi-lateral U.S.-China WTO Accession Agreement." Despite its title, the agreement did not deal with China's entrance into the WTO. Essentially, it merely defined all the trade and investment concessions which China had already made or was ready to make to the U.S. and in some cases, by extension, to other countries. Those concessions cover a broad range of issues. Chinese tariffs, particularly on a large number of goods which the U.S. has characterized as "U.S. priority products," will be severely reduced or even eliminated. American automobiles, for example, which China currently taxes at a rate of 80-100% when they come into the country, will carry tariffs no larger than 25%. Tariffs on "new technology" products brought in by U.S. companies are to be completely eliminated. China's export subsidies on its agricultural products are to be eliminated (while U.S. subsidies are left untouched). All quotas limiting the amount of U.S. products allowed into China are to be phased out. U.S. corporations will be given the right to import and distribute products without going through the Chinese state, or even through the privately owned Chinese import corporations which have been established in recent years. Most restrictions on financial and professional services provided by U.S. corporations will be phased out. Many of the fields where China up until now has prohibited foreign investment (for example, telecommunications, or the issuing of securities) are to be opened up to U.S. companies. Other restrictions on investments (such as local content requirements, health and safety prohibitions or the requirement that technology brought in be transferred to a Chinese firm) are to be eliminated for U.S. products.

In the months after the agreement was signed, but before the House vote, the Clinton Administration bragged, and bragged again about it. "China made significant, one-way market-opening concessions across a wide range of high- technology products and services. The United States made no market opening concessions." This boast came from a paper issued by the White House regarding high-technology, but in paper after paper, dealing with finance, agriculture, manufactured goods, services, trade, small business, etc., the same kind of statement can be found, adjusted only for its context. While these undoubtedly were written and the information selected as part of the campaign to get congressional approval, nonetheless, such statements aren't far from the truth.

The comprehensiveness of the agreement and the fact that it so clearly is a one-way set of concessions shows to what extent the U.S., the world's dominant imperialism, has been able to impose its wishes on China.

China: Reintegrating into the Imperialist Marketplace

The November agreement reflects the degree to which China finds itself at a dead end. It needs trade and investment to break out of the restricted situation it finds itself in, but by inviting in investors and traders from the imperialist countries, China is opening itself up to all the ills which had beset it before, when it was directly under imperialism's thumb. The companies which come in, freed from many of the restraints the Chinese state had imposed in order to keep some control and order over the economy, will surely not invest in what's needed in China, but only in what can turn a profit, or more precisely, the quickest profit. China may see a few more McDonald's opening up, more Coca Cola sold, more hotels and offices thrown up in bouts of real estate speculation, but it won't see a boost to the industry it so desperately needs. It may very likely see more of its agricultural areas turned over to cash crops for export, but it won't see an improvement in food grown for the population.

The move into the imperialist marketplace will have serious repercussions for the Chinese population. It already has. For the last ten years, the number of Chinese people sinking into impoverishment has increased. The re-emergence of the market in rural areas means that many peasants can no longer support themselves on the land they once tilled. Add to this the corruption which has been spreading in local areas where officials use their position to expropriate the land, and you have a situation made desperate for hundreds of millions of peasants. Official statistics put the number of migrant workers, moving around the countryside or into the cities in search of work – the so-called "floating population" – at somewhere between 120 and 150 million persons, the number growing every year. In addition, as the state enterprises shed workers, urban unemployment is on a precipitous rise. In May of 1997, Chinese Vice-Premier for Industry Wu Banguo reported that nine million state sector workers had been "displaced" from their jobs just during the first three months of that year alone. Shanty towns are leaping up around the big cities as the number of unemployed continues to grow. According to an official government spokesperson, the total number of unemployed could touch nearly 200 million workers this year.

As the state continues to dismantle the big state-owned enterprises – one of the demands made on it by imperialism – the numbers of the unemployed will continue to grow. The jobs available today are those in small workplaces in the zones set up for foreign investment or in those run in rural areas by sections of the state apparatus seeking to enrich themselves. In all of these cases, the conditions are ferocious, without the minimal protections accorded to workers in the big state-run enterprises. Of course, for those unable to find other work, there are always the fringes of society, where prostitution, gangsterism and the black-market flourish.

Moreover, the social protections as far as the guarantee of employment, retirement, and health care, which once were a condition of work in the state-owned enterprises, are effectively being suppressed. The money for education is being cut back, to which the growing level of illiteracy attests.

In other words, as far as the population is concerned, China's growing encouragement of private enterprise and its increasing entanglement in the imperialist marketplace are pushing China backwards. While this slide backwards began before China signed the November agreement, the demands made in this agreement can only push China further backwards and make conditions for its population even worse. Many of the points of the agreement, for example, call on China to reduce the protections accorded to its workers in the state-sector, and to open them up for foreign investment.

China: Another Pretext Taken by the Unions to Avoid a Fight

James Hoffa Junior, current Teamster president, proclaimed before the vote on China, "This pact comes at a time when the Chinese government's trade policies are deliberately targeting U.S. markets." Referring to the U.S. trade deficit with China – which in 1999 reached 68 billion dollars, almost double what it was five years before – Hoffa added: "This deficit increase will suppress American wages and result in the loss of even more U.S. jobs. More than 600,000 jobs have been lost already as a result of earlier trade agreements such as NAFTA."

These views are hardly unique to Hoffa. Almost across the board, union officials opposed the normalization of trade relations with China with such claims, even if they often dressed up their demands with a show of concern for the difficult conditions Chinese workers find themselves in.

This argument, when applied to countries like Mexico or China, is absurd. The U.S., with a Gross Domestic Product (GDP) nearing 10 trillion dollars a year (9.48 trillion in 1999), dwarfs China, even if China's purported one trillion dollar a year GDP were accurate. Whatever is agreed upon between the U.S. and China has been dictated by the needs of U.S. imperialism, not by a China able to "target U.S. markets" as it wants.

That doesn't mean that the impoverishment which U.S. imperialism today imposes on China serves American workers. The same greedy corporations that seek to benefit from the precarious situation the Chinese population finds itself in also seek to impose more sacrifices on American workers.

But when the unions try to get American workers to blame China for the situation they find themselves in, this simply prevents the workers from targeting those really responsible for the situation here in the United States, as well as around the world, American bosses seeking to exact as many sacrifices as they can.

What has happened with NAFTA illustrates the problem very clearly. In the early 1990s, faced with wave after wave of lay-offs as the corporations began in earnest to "downsize," the union bureaucracies directed the workers' attention to Mexico and other third world countries. Hammering away at NAFTA, they claimed that if Congress passed NAFTA, manufacturing would leave the U.S., running away to Mexico where labor is cheaper. It was the same language, the same reasoning that the unions make today over China.

Hoffa says that NAFTA cost American workers 600,000 jobs. That figure is highly questionable, being higher than the total number of workers employed by Mexico's export industries. But even if it were true, this would mean that many more jobs were lost somewhere other than to NAFTA because, on the whole, about two million manufacturing jobs have been lost in the last ten years. Even more striking, manufacturing output inside the U.S. not only did not decrease along with the decrease in jobs, it continued to INCREASE.

If what the unions claimed about NAFTA had been true, not only would jobs have been lost to Mexico, but production in this country should have decreased proportionately. And yet, according to U.S. Department of Commerce Statistics, the U.S. output of manufactured goods has increased by 35% in the years since NAFTA came on the scene.

Sure, you can always point out a plant which moved to Mexico – as the unions regularly do. But the fact is, as those figures show, the vast majority of jobs lost here were lost to profit-hungry bosses who "downsized," that is, sped up the pace of work, stretched out the hours of work, and combined jobs.

In making the propaganda against Mexico ten years ago, just as they make this same kind of chauvinist propaganda today against China, the union bureaucrats paved the way for "American bosses" to take "American jobs" right here in the good old USA. Convincing the workers they were about to lose their jobs to low-paid foreign labor, they thereby convinced them that it was impossible to resist the attacks coming down on them inside American factories.

By targeting NAFTA, the unions avoided calling on the workers to make the kind of fight which could have protected all two million of those jobs.

The union bureaucracies in this country have always ignored the role played by imperialism in impoverishing the rest of the world. Their propaganda against workers in other countries fastens chauvinistic, nationalistic and patriotic views onto the American workers, weakening them in front of American bosses who are carrying out a real war on the working class right here at home, not to mention the wars they from time to time call on American workers to fight in other countries.

When union leaders ask the workers to focus their anger on other countries, not only is it a gross distortion of reality, it also provides an enormous service to the bosses, confusing the workers as to what the problem is and what can be done about it. It traps the workers into a fatalistic acceptance of everything the bosses do in this country.

The problem for the workers in this country, as in China, Mexico and everywhere else, is to build a relationship of forces which favors the workers. To do it, they need a clear consciousness of who their enemies are, and what they need to fight against.