Tiananmen: Another Bump in China’s Road to WTO Accession
Deng Xiaoping’s 1978 Open Door policy unleashed China’s economy beyond its borders through political reforms and regional trade agreements. This led to rapid growth and China’s emergence as a major player in the global economic system. China began the process of negotiating membership in GATT, the General Agreement on Tariffs and Trade, in July 1986, gaining observer status. However, it took fifteen years and changes in its tariff, foreign investment and industrial policies for China to be admitted to GATT’s successor organization, the World Trade Organization (WTO), on December 11, 2001.
The role of the U.S. in China’s bid for accession was complicated by competing priorities: economic security and support for freedom of global commerce vs. defense of human rights. China was among the fasting-growing markets for U.S. goods and services; conversely, imports from China to the U.S. almost doubled from 1996 to 2001. But progress was hobbled by continuing disagreements over market access, transparency and intellectual property rights, and, notably, world reaction to the brutal repression of protests in Tiananmen Square on June 4, 1989.
Charles Stuart Kennedy interviewed Mark Mohr in October 2009 and Gilbert Donahue in April 2000 about their experiences with the China accession issue, and David Reuther talked to Robert Goldberg in September 2011 about China’s policies in the wake of the Tiananmen crackdown.
“China was so intensely communist that the concept of private ownership was very bothersome to its leaders”
Gilbert J. Donahue, Economic/ Political Officer in Beijing, 1986-1987
DONAHUE: My initial assignment was as one of the two deputy chiefs of the Economic Section. We had a sizeable Economic Section divided into two units. One was doing internal reporting; the other was external. I was the chief for external, which meant responsibility for trade and investment.
That was one of the peak periods of American business interest in China. Many businesses had already gone in and had contemplated an investment but had not actually made it or were in the process of completing their legal contract work or completing the negotiations with their Chinese partner, whatever it was.
They were beginning to run into various kinds of problems. So we were in a problem-solving mode. On the one hand, we were listening to business and what their concerns were and trying to help them determine who in the Chinese government might be helpful for them. On the other hand, we were also dealing with the Chinese Government at a kind of macro level on trade policy….
We were negotiating with the Chinese on becoming a member of the General Agreement on Tariffs and Trade [GATT], at least moving in that direction. We were discussing with them changes that would be required in their legal system, the establishment of laws to allow Western business to operate, all kinds of things that we take for granted that they did not guarantee: the sanctity of contracts, the ability to own more than 50% of an enterprise, all of the features of a capitalist system.
China was so intensely communist that the concept of private ownership was very bothersome to its leaders – both of the government and the party. As a matter of ideology, they only wanted to accept ownership by the state. So the concern was how to allow a foreign entity to operate in China without full ownership or without the amount of ownership that made it comfortable.
In fact, a lot of the problems faced by U.S. business involved this issue of ownership. Even if a foreign business owned outright its operations in China, it did not have the ability to manage them entirely without Chinese acquiescence or agreement to certain elements of its management.
That included hiring personnel, renting office space, certainly putting up a building, all of which required many different kinds of permits. We had to help American businesses sort this out and determine how it could work.
In early August 1989, I arrived to China again about six weeks after what we referred to as “the Tiananmen incident.” The U.S. and Britain, and probably most other Western countries, had almost no access with Chinese officials for six months after the Tiananmen crisis and really not very easy relations for a full year. We all collectively held our breath at the one-year anniversary of Tiananmen because we didn’t know exactly what to expect.
So, it wasn’t until the summer of 1990 that there was even a return of dialogue that was comfortable at all with the Chinese officials. That was true even in the U.S. Chinese embassy; people who previously had had contacts with other governments just wouldn’t leave their office.
“I’m sorry, but none of this can happen”
The Western governments certainly did feel the need for stocktaking, and there was a sense that we could not go back to a status quo. So many of the bilateral assistance programs that had been anticipated had to be cut entirely off.
For example, when I was on the task force in the State Department at the time that Tiananmen Square occurred, we had to draw up a list of initiatives, programs and proposals that had been scheduled for the rest of 1989.
That included CODEL visits, high-level administration visits, initiatives that involved the private sector, and even bilateral negotiations. One after the other, we killed them all. In fact, USTR [the U.S. Trade Representative Office] was ready to enter what I might call the final stage of negotiations to bring about Chinese participation in the GATT, the forerunner of the World Trade Organization [WTO].
The USTR officials felt that in their preliminary negotiations during the spring of 1989, they had just about tied up all of the loose ends and gotten satisfaction from the Chinese government on some of the areas that were of interest to us or were requirements as far as we were concerned for Chinese entry. They were just ready to send a delegation in late June to wrap this up.
I had to call USTR and say, “I’m sorry, but none of this can happen.”
It was a good three to six months before any high-level delegations visited China. We just were holding our breath, looking for evidence of any willingness by the Chinese government to return to contact. So, in Beijing and in the constituent posts, the only kind of contact was a very formal type. Even the visas, especially student visa applications, fell off greatly…
“All sanctions against China, including those from other foreign governments, were originated and orchestrated by the U.S.”
Mark E. Mohr, Deputy Director, Political Section in Shanghai 1988-1990
MOHR: [The Government of China] was almost totally closed off to the embassy after Tiananmen since the PRC official line was that China didn’t do anything wrong and that all sanctions against China, including those from other foreign governments, were originated and orchestrated by the U.S. We were not very popular with the Chinese government.
So every Chinese government agency was closed off to us. This lasted several months. The only contact we had was a once-a-week meeting at the Foreign Ministry (seen right.) The ambassador was called in to be lectured to on how bad we were and why the sanctions needed to end. (U.S. sanctions, imposed by President Bush, included an end to all military cooperation and a ban on high-level Chinese visits to the U.S.)
I was the note-taker at the weekly meetings between the ambassador and the senior Chinese foreign ministry official, Liu Huaqiu. Otherwise, there was nothing to do. Many of us worked out in the newly opened health clubs, and the Chinese language officers studied Chinese. It was most strange. We were an embassy, but the host government would not talk to us….
All military cooperation ceased, and China’s leaders were barred from visiting the United States. The Congress, the media, and public opinion were all critical of this policy. They felt we should be doing more to punish China for shooting the students, especially in the economic area.
A consensus therefore built up to abolish most-favored-nation (MFN) trade status with China. If MFN were taken away from China, Chinese goods into the United States would be taxed at least at double the going rate. If that were to happen, China’s trade with the U.S. would be destroyed. …Thus, the task of the China desk post-Tiananmen was to preserve MFN for China.
President Bush actually told the State Department directly that the China desk was to focus on preserving MFN for China. The basic threat came from Congress. There was a majority on the Hill to take MFN away. Our goal was to find 34 opposing votes in the Senate, enough to sustain a Presidential veto when the legislation passed to remove MFN from China….
“China still has the red blood of the students on its hands, but all the Bush administration cares about is the green of money”
Unfortunately, U.S. business interests refused to support us, even though we were fighting for their interests in trade with China. We’re talking about billions and billions of dollars in trade here. Nevertheless, they were afraid to draw the anger of Congress, and the public.
The basic argument against continuing MFN ran something like this: China still has the red blood of the students on its hands, but all the Bush administration cares about is the green of money. So U.S. business was afraid, and would not help us.
We were left to our own devices. We drew up our arguments for preserving MFN, and would just call or meet with Congressional staff and the leaders of the relevant committees to press our case.
We coordinated our efforts with the Bureau of Congressional Affairs, and identified about 40 Senators who might vote in favor of MFN… It was a given that the House would vote to take away MFN. We concentrated on the Senate instead, trying to get the 34 votes we needed there to sustain a Presidential veto.
I will never forget the day the vote was taken. I got a call from Pelosi’s chief staffer [Nancy Pelosi was a Member of the U.S. House of Representatives from California’s 5th district, seen right] who said, “You are probably celebrating right now. (Actually, we were). You shouldn’t because we got a late start, so now we have a strategy in place from this very moment. We are starting today. If I were you I wouldn’t celebrate too much because next year we are going to bring you down, and we are going to take away this odious Most Favored Nation status.”
Fortunately, his words proved hollow: in the next year, they lost by 23 votes. But by then things had changed, and that was a year later. On the day, the staffer really scared me. I mean you work so hard to accomplish this goal, and after just one phone call, you think you are going to have a tougher fight on your hands over the next year, and this time you might lose.
After all, on that day, we only won by one vote. It’s like doing some huge research paper for school, then your computer eats it, and you have to start all over again. It really was an awful feeling.
The House people were encouraging the Senate to block it. The Senate decides when the president vetoes a bill. The House and Senate first passed a bill to remove MFN from China. Then the President vetoed the bill, and the Senate, which of course had passed the bill, now had the opportunity to override the presidential veto. But they needed a two-thirds majority to do so.
It was Pelosi that led the fight from the House, and she is from San Francisco. That is one of the reasons she said she had to get involved, because so many of her constituents are Chinese. But I think this was an excuse. She was in her first term, and this issue gave her national exposure. It launched her leadership career.
I would talk to her, she would call me personally and we would argue. I told her I didn’t think she was right. I didn’t go so far as to say that I questioned her integrity, but I don’t think she really cared about the issue. I think she cared about getting her name in the newspaper on a daily basis.
“This was one of the few instances where the Republican leadership in Congress would be taking an act that would hurt U.S. business interests”
[Republican Senator] Jesse Helms (seen left) was chairman of the Senate Foreign Relations Committee (SFRC). Lucky us. I mean, here we have a Republican president, with a Republican majority in the Senate. The president is passionately in favor of preserving MFN for China, but there is no way in hell that he can convince a majority of his own party in the Senate from voting to take MFN away from China.
Ironic, isn’t it? And it wasn’t as if we had this isolated or irrational policy. Every other major country in the world, the Europeans, the Japanese, the Australians, etc. had sanctions on China because of Tiananmen, but none, I repeat none, had any trade sanctions.
So our policy was in keeping, so to speak, within international norms. Of course Congress didn’t care about what anyone else in the world was doing. All it cared about was punishing the Chinese leadership for what it did at Tiananmen. But by taking MFN away, it would be punishing the Chinese people far more than the leadership, and the people had been the victims.
Another irony was that this was one of the few instances where the Republican leadership in Congress would be taking an act that would hurt U.S. business interests as well, but emotions were just too high. Members of Congress had been so provoked by those T.V. images during Tiananmen that they didn’t care.
“The way the Chinese saw it, they didn’t do anything wrong”
There is another point I would like to make. Not only did we not have the support of U.S. business in the MFN fight, we didn’t have the support of Secretary of State James Baker either. At the time, Baker had presidential ambitions. I think he felt, assuming that Bush would win again in 1992, that he could be a presidential candidate for the Republicans in 1996.
I drafted three separate speeches for Baker to give supporting MFN for China. They always were returned to me with something written on the top to the effect of: “Will not deliver.” The third time this happened, I went to one of Baker’s staffers and asked why the Secretary would not deliver the speech. He replied, “Mark, you are so naïve. The Secretary does not do losers.”
I asked him to explain, and he said MFN would be taken away from China, and the Secretary did not wa
nt to back a losing cause. I got really mad, and said that so long as Baker took his paycheck from the Treasury, he was Secretary of State, and he had a duty to act like one. The staffer just chuckled. (Baker is seen at right.)
The real reason for Baker’s inaction was that he didn’t want to anger Congress, and bring the media down on his head, in defending MFN for China. This, he felt, would damage his chances to run for president after Bush’s (assumed) second term. I often wondered why the President ordered the China desk to defend MFN, but didn’t order his Secretary of State to do likewise.
I would have to assume that the President called many senators and lobbied personally. I know for a fact that he was engaged heavily on this issue. Being a former head of the U.S. liaison office in China, President Bush had a good background and a good feel for the bilateral relationship. He really cared.
It’s funny, because in a way, the President was the real head of the China desk. We on the desk really didn’t have much support within the building, but in the end it didn’t matter, because we had the support of the President….
The way the Chinese saw it, they didn’t do anything wrong. There had been a challenge to their regime and they beat it back. They felt it was no one else’s business. They were fairly outraged that we decided they had done something wrong and imposed sanctions on them. The President publicly called for them to apologize. That was never going to happen. So we maintained our sanctions, and they continued to criticize us and refuse to do business with the U.S.
Finally, there was agreement within the U.S. government that if we could preserve MFN, the Chinese would see that, despite the sanctions, we meant them no real long-term harm, that we valued the bilateral relationship and wished to maintain it.
“No. Can’t do it. Can’t sell it. The President won’t buy it”
Robert Goldberg, Economic Officer in Beijing, 1996-1999
GOLDBERG: …One of the events that marked the re-normalization of the relationship after Tiananmen Square was when that Jiang Zemin visited the United States in October 1997 and Ambassador [James] Sasser accompanied him on that trip…(Jiang Zemin with President Clinton during 1997 visit at left.)
[Working with China on WTO accession], I saw a lot of people at what was then still MOFTEC, the Ministry of Foreign Trade and Economic Cooperation, which morphed into the Ministry of Commerce years later. Also I saw a lot of people at the Ministry handling telecommunications – today’s Industry and Information Technology Ministry. We also worked with the U.S. Treasury Department to make contacts with the People’s Bank of China on tax issues and subsidies for state owned enterprises. Financial services didn’t occupy a terribly large component of our WTO work.
We coordinated closely within the mission with the Foreign Agriculture Service and outside with the U.S. Department of Agriculture since market access for U.S. agriculture was a significant issue in WTO accession. Not as significant as we would have liked it to be but still significant. One of the criticisms of my work at that time was that I spent more time doing speeches and presentations for Sasser than I did on the issues I had been assigned to go out and do. Probably true.
In June, 1998, I was out there for ten days in advance of the President’s arrival and I was the Control Officer for [U.S. Trade Representative Charlene] Barshefsky (seen right.) The Chinese were interested in having a WTO agreement ready to sign when the President got there.
The last meeting I attended with Charlene was at MOFTEC about an hour before the President’s arrival. She was sitting across the table from Shi Guangsheng, the MOFTEC Minister. Sitting next to Shi was Long Yongtu — their senior WTO negotiator — who was looking at his feet the entire time because he was embarrassed about Shi’s pleading to get Charlene to sign a Statement of Principles. To his right was Yi Xiaozhun, who became a vice minister at the Ministry of Commerce and is today China’s WTO Ambassador in Geneva.
So there is Shi trying to get Charlene to sign this two page MOU [Memorandum of Understanding] and Charlene saying, “No. Can’t do it. Can’t sell it. The President won’t buy it”… The reason why we couldn’t sign off at that time is a Memorandum of Understanding. The issue was that we had no agreement that spelled out chapter and verse what China’s obligations were.
The next act in the WTO story was Premier Zhu Rongji’s visit to Washington in April of 1999… He thought he was going to sign an agreement too, and I think at one point the administration was prepared to sign. But then White House advisors kept at Clinton and told him we didn’t have enough to justify signing. Nobody wanted to sign a bad agreement just to announce it at a high level meeting, and it would not have been as good an agreement as the one we eventually concluded.
A lot of people thought that Zhu Rongji was using the WTO as a way of making China’s domestic industries and companies, particularly the state owned enterprises, more competitive. He wanted them to operate in a global business environment. I think there is a lot to that. Sasser said that Zhu was pretty disappointed that Clinton had backed off. It probably had a bit of impact on him politically, but I don’t think it ever showed in his relations with the U.S. One thing – if an agreement is not signed before a visit of this sort, it’s unlikely to be signed during it. But the Chinese really pressed during the visit, and it just didn’t happen.
One of the things the academics picked up at this time is the USTR published a list of what were considered Chinese concessions, and that publicity damaged Zhu’s standing at home. But I think the biggest damage was the failure to bring this to a close.
One of the events that came up during the time I were in Beijing was the May 1999 bombing of the Chinese embassy in Belgrade. Well, it was interesting; interesting is sort of an understatement. There was disbelief in the Mission that this had happened. You know the famous story – we hit what we wanted to hit but it wasn’t what we thought it was. The defense attaché received a call in the early hours after the bombing and was asked whether the Chinese had an Embassy in Belgrade and where it was located.
The mission hunkered down. The first day, demonstrations around the embassy were reasonably peaceful. We closed up shop and were told to stay at home. You could always get into the embassy by jumping over the wall between the Irish and American embassies and you could exit the same way. We had very good relations with the Irish.
But the demonstrations turned violent the evening of the second day after CCTV coverage of the bodies of the dead Chinese diplomats being flown home and images of bloody clothing. That evening, the Chinese government bussed in some hooligans likely from the Public Security Bureau or the Ministry of State Security, and they threw rocks and plastic liter bottles filled with urine at the mission.
They busted almost every window in the mission, but they never broke one of our antiquated Wangs [early computers]. It didn’t make any sense; such extraordinary aim. When we finally got back in the mission, clean up didn’t take that long and we were up and running pretty quickly.
While the demonstrations were going on, we were supposed to stay inside our apartments near the Embassy, but in fact, they were in such a limited area – with Chinese students who were bussed in to march around for a couple of hours or so – that we didn’t feel any inhibition about sneaking out the front of side entrance and going over to Starbucks for a cup of coffee. Some officers met contacts there who provided insights about what was happening elsewhere in the city….
Anyway, we did not meet the final agreement for China’s accession into WTO until the next administration… The sense was we had enough to sell the agreement and it was time to cease the bickering. Both sides were moderately satisfied with the agreement, though the Chinese maintain they negotiated under duress and at a disadvantage and the final outcome was not good for them.
But ten years on, if you look at the outcomes, I think from China’s perspective it has been successful, more so than for us.