China Deal Boosts U.S. Technology
THOUSAND OAKS, Calif., May 22, 2000 (AP Online via COMTEX) -- Business is
booming at tiny International Technologies Network Inc., thanks to China's
growing trade with the United States and other countries.
Annual revenues for the company have soared from $400,000 in 1998 to a projected
$12 million this year as a result of demand for its services that match U.S.
technology companies with Chinese partners for joint manufacturing ventures.
The future for ITN and its 14 employees may be even brighter if Congress
approves permanent normal trade relations with Beijing, which is being debated
in the U.S. House this week.
If terms of the agreement are fully implemented, technology-focused companies,
from small consultants like ITN to giants such as Motorola, Lucent and IBM, will
be among the big winners under expanded trade between the two nations.
American farmers battered by low commodity prices also stand to gain in a big
way. Cotton growers across the Sun Belt already are increasing acreage on the
expectation of a healthier export market stimulated by falling Chinese tariffs.
Growers of soybeans, wheat and other grains also are looking at better foreign
sales.
``Half of what I grow is exported,'' said Scott Fritz, who has 1,300 acres of
soybeans near Winamac, Ind.
``China being the world's most populous country, it's just extremely important
that agriculture be given a chance to sell our products to the Chinese. I don't
know what I can say to emphasize how critical this is to us.''
The deal would be another burden for labor-intensive U.S. industries like
textiles and footwear, which would face increased competition from Chinese
competitors.
And high-tech companies, manufacturers and other businesses might see improved
trade relations as an opportunity to export assembly jobs to take advantage of
low wages in China.
America already has lost nearly 700,000 jobs to China, and could lose as many as
872,000 more over the next decade if the trade deal goes into effect, said
Robert Scott, an economist at the Economic Policy Institute.
``We ship them parts and components and they ship us completed products. Labor
is going out of the equation,'' he said. ``It may be in the interest of
companies to outsource production, but it isn't good for labor in the United
States.''
Many of those jobs will be lost anyway to developing countries with low labor
costs, supporters of the trade deal argue. In the meantime, increased trade with
China would generate new jobs for Americans, they say.
``It's not an issue of more jobs, but of better jobs,'' said Dan Griswold, a
trade analyst at the Cato Institute in Washington. ``The sectors of the U.S.
economy that will gain the most from this are the sectors that will pay well:
the high-tech sectors, the service sectors.''
Whether either forecast comes true depends on the House vote later this week on
ending Congress' annual review of China's trade status.
Since 1980, trade with China has been subjected every year to an acrimonious
debate that focuses more on human rights and U.S. foreign policy than commerce.
Ending the annual review would elevate China to the same trade status most other
nations have with the United States.
The change would clear the way for a potentially lucrative trade agreement that
promises to drastically slash Chinese tariffs on a wide range of U.S. goods,
from food to electronic equipment to automobiles. The deal -- negotiated last
November in return for U.S. support for China's entry into the World Trade
Organization -- also would open China to American banks, insurance companies and
law and accounting firms.
Tariffs on U.S. products would drop on average from 17 percent to 10 percent by
2005. Automobile tariffs would fall from 80 percent or more to 25 percent by
2006. Tariffs on high-tech appliances would fall from an average of 13.3 percent
to zero by 2005. Software tariffs would drop from 30 percent to nothing.
The changes could double U.S. exports to China from an estimated $13.1 billion
in 1999, according to an analysis by the Goldman Sachs investment firm.
Agriculture exports would increase by $2 billion, while exports of high-tech
electronics, worth $1.8 billion in 1998, would rise 25 percent or more, the
study predicted.
Chinese exports to the United States, valued at $81.9 billion, are expected to
increase at a slower rate, the Congressional Research Service says.
China's membership in the WTO would mean that organization would help settle
disagreements between U.S. companies and their Chinese counterparts.
``This gives us a platform from which to arbitrate a dispute,'' said John Chen,
chief executive officer of the software maker Sybase Inc., which has sales of
about $25 million a year in China. ``It really is a good vehicle, a good weapon
for us.''
At ITN, the trade deal promises to create more demand for the company's
matchmaking services. The company also sells Chinese-made electronic components
like TV tubes in Turkey and Europe and hopes to start sales in the United States
this year.
``There are tremendous opportunities in China,'' said S.R. Nair, ITN's
president. ``It's hard work. It's not easy, but making money is never easy.''
Even with a favorable trade agreement, making a profit in China could be elusive
for U.S. companies. Ultimately, their success will hinge on Beijing keeping its
promises after the trade deal goes into effect.
``It's pretty easy to write down on paper the promise to do something, but
actually getting that implemented on the ground is extremely difficult,'' said
Greg Mastel, director of the global economic policy project at the New America
Foundation.
Copyright 2000 Associated Press, All rights reserved.
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By MICHAEL WHITE
APO Priority=r
APO Category=1153
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