THE COMING BATTLE OVER CHINA IN CONGRESS

THE COMING BATTLE OVER CHINA IN CONGRESS

Now that Washington and Beijing have reached agreement concerning accession of the People's Republic of China to the World Trade Organization, the battle for Congressional support is about to begin.

China can enter the WTO without a vote by Congress, provided two-thirds of the 135 member nations support accession. But Congress must grant China permanent normal trade relations. If it does not, the stunning market-access benefits in the recent accord will flow to other nations, but not to the United States.The choice would seem clear. Repeal the Jackson-Vanik Amendment to the 1974 Trade Act, which requires annual renewal of most-favored-nation trading status for non-market economies - communist countries - and enjoy the rewards of trade liberalization with China. Or retain a relic of the Cold War and deny U.S. consumers and businesses a basic human right: the right to voluntary exchange.

Does anyone seriously believe China's trade status with the United States should be based on a liberal emigration policy, as called for in Jackson-Vanik? China would be glad to send millions of immigrants to America in return for permanent normal trade relations.

The Soviet Union is gone, central planning is dead, and China has undertaken market-oriented reforms for more than 20 years. Today, most prices in China are determined by demand and supply, not by government decree. And more than 70 percent of industrial output value is produced by the non-state sector. That is why the European Union and Australia recently discontinued using the non-market economy classification for China.

Communism, however, remains - and that is the issue Congress must confront. Can China be a market economy and a communist polity?

No one will deny that the Chinese Communist Party holds a monopoly of power and violates human rights, but neither can one deny that most economic decisions are made by the market, not the plan. What must be understood is that, although China does not have a free market, it has moved step by step toward a market-liberal system since 1978. If by non-market economy is meant a Soviet-style centrally planned economy, then the non-market economy label is clearly inappropriate for the new (post-Maoist) China.

Even the China Daily - the voice of the party - concedes, ''You cannot snap a finger and insist that China is still a non-market economy. Private, foreign and state-owned enterprises are running on an equal footing.'' Recent reports in the China Economic Quarterly suggest the private sector may account for as much as 53 percent of the mainland economy.

The PRC Constitution now recognizes the importance of the non-state sector, including private businesses, increasing demands by non-state firms for equal protection under the law.

By repealing Jackson-Vanik, Congress would clear the way for increased U.S.-China trade, lock in market liberalization for China and promote long-run political reform by subjecting China to international norms and the rule of law.

This does not mean we should condone the Communist party's human-rights violations or trade away our military secrets and technology for profit. It simply means we should face reality and recognize that political change will come slowly to the mainland - and that overall liberalization is more apt to occur in an atmosphere of trust developed through trade relations than through threats and protectionism.

Indeed, it is ironic - and contradictory to the spirit of the WTO's nondiscrimination principle - that the United States should insist, under the current accord, that China's non-market economy status be retained for a period of 15 years after the country accedes to the WTO.

Thus, even if Congress repeals Jackson-Vanik, the non-market economy stigma will stick to China for the foreseeable future. In that sense, the U.S.-China WTO accord was a victory for U.S. protectionism and for Chinese liberalism, and points to a serious flaw in the WTO protocol.

Allowing Washington to treat China as anon-market economy makes it easier for anti-dumping penalties to be imposed on the mainland - and for the United States to protect its heavily unionized steel industry. Moreover, China has agreed to allow the United States to extend (by up to 12 years) selective safeguards against import surges in order to protect textile and other industries.

Those safeguards will follow the standard set by the obscure section 406 of the Trade Act of 1974 in determining whether U.S. industry has been damaged by an import surge from China. That section applies to non-market economies. Instead of having to prove serious injury, all the United States must demonstrate is ''market disruption,'' a vague and weak standard for justifying higher tariffs or other protectionist measures. Meanwhile, textile-specific safeguards are available for four years after import quotas expire in 2005.

Forcing China to accept an extension of the non-market economy methodology and extending safeguards beyond normal WTO practices are a clear indication that the WTO protocol is flawed. These measures are instances of managed trade, or trade socialism, not trade liberalism. And they are being driven not by communists but capitalists.

Congress should repeal Jackson-Vanik, join the EU and Australia in ending the non-market economy methodology for China, and make sure the WTO protocol is consistent with free-trade principles. Until the schizophrenic treatment of China ends, the symbol of the United States as the world's champion of freedom must be questioned.