CHINA SHOULD LISTEN

CHINA SHOULD LISTEN

he U.S. government has sent a clear, simple message to China about its proposal to slap stiff controls on the international container shipping business: The proposal, as it stands, is not a good idea for anyone.

It's not a good idea for ocean carriers of any flag that serve China. They work far more productively and cost-effectively under free competition than they do under the thumbs of any government regulators.It's not a good idea for shippers, who inevitably bear higher costs and risk poorer, less reliable service under such economic regulation. That includes Chinese shippers.

And it's not a good idea for China itself, at a time when it is actively reaching out to join the World Trade Organization and professing its willingness to open its markets and play by global free-trade rules, to take a giant step backward in shipping.

The question, of course, is whether Beijing will listen to the message. It should.

China's regulatory proposal is just part of a difficult knot of maritime issues between it and the United States. Those include long-standing complaints that China's restrictions and red tape hurt non-Chinese carriers; indeed, the Federal Maritime Commission last summer threatened retaliatory sanctions. The issues will be the subject of the long-delayed next chapter in U.S.-China maritime negotiations, scheduled to begin late this month in Beijing.

As contentious as current practices are, China's proposed regulatory regime would open the door to an even less acceptable future. It would lock ocean transportation to and from the world's biggest market into a system that has been discredited in the rest of the modern trading world.

China quietly unveiled the proposal at the end of 1998, not long after Congress had passed the Ocean Shipping Reform Act. Beijing called for requiring container shipping lines that serve it to submit their rates to a Chinese government agency. Tariffs and contract rates would be made public, and carriers would be required to make the terms of any contract with a shipper available to any other shipper. Bills of lading would have to be filed with the government.

In short, Beijing proposed heading in exactly the opposite direction from the course the United States and much of the rest of the world are following. The shipping-reform act greatly loosened the U.S. government's reins on shipping in a bid to promote and improve competition. It allowed carriers and shippers to negotiate and sign one-on-one contracts that meet the needs of each side, and to keep the terms between themselves.

China originally said it would cut off comments on its proposal on Jan. 15, 1999. It didn't. Neither did it implement the regulations, which were viewed with concern by the European Union and Japan as well as the United States. Beijing said the West had misunderstood the proposal. But the measure is still pending.

Meanwhile, the FMC has held off on the sanctions it threatened. Also on hold has been an FMC decision on a request by China Ocean Shipping Co., China's big, international container carrier, for a waiver that would allow it the same pricing flexibility that privately owned carriers have. Under OSRA, state-controlled carriers are required to give 30 days' notice of tariff changes, while everyone else can change rates daily.

So that's the scene as the resumption of stop-and-go U.S.-China talks nears: a tense standoff.

Against that backdrop, U.S. Maritime Administrator Clyde Hart wrote a straightforward letter late last month to Hong Shanxiang, vice minister of communications, the Chinese government agency that has jurisdiction over maritime matters. The letter has drawn support from U.S. shippers.

Hart reiterated the key concerns of Washington and other governments: that a ''non-commercial body'' would be involved in setting freight rates, and that sensitive maritime-company information would be going to a government that operates competing maritime companies and thus could be available to those companies (a charge Beijing denies).

Moreover, he said, the burden of the regulations would not be limited to non-Chinese.

''Chinese shippers, like their American counterparts, will be disadvantaged if the proposed rules become effective,'' Hart wrote. ''Companies considering importing goods from China may be prompted to purchase them from China's neighbors instead if shipping from China will result in public disclosure of sensitive transportation data.''

He called on Beijing to revise the proposal to ''state unambiguously that the government of China will not interfere in the market for shipping services between carriers and shippers.'' He said China should authorize the confidential contracting that is common in the rest of the world.

''Such an unequivocal statement of respect for a free market in ocean shipping would be a forward-looking and clear rejection of market control by bureaucracies,'' Hart wrote. ''Ignoring the comments of so many concerned parties or issuing the regulations with only cosmetic changes would raise severe doubts about China's commitment to market principles and international shipping practices.''

Hart is right. China should listen - and, when all is said and done, act accordingly.