Although it was no surprise that the US House of Representatives passed the bill to grant China permanent normal trading relations (PNTR), the margin was rather more comfortable than expected. The Clinton administration need not have been so nervous; in the end, Congress was unlikely to reject a bill that brings such obvious economic benefits to the US.
The outcome is also a relief to most Taiwanese, since we expect that the agreement -- and particularly the Chinese WTO entry that it almost assures -- will bring many benefits to Taiwan as well.
The arguments are well-rehearsed. First, Tai-wanese investors in China will no longer have to worry that the door to their main market will be shut (some 80 percent of the production of Taiwanese-owned factories in China is exported). Second, China's WTO entry should be accompanied by our own, as the House reiterated in an amendment to the PNTR bill. For Taiwan, WTO entry will provide a much-needed forum to manage trade disputes, free from the political specter of China or the lack of diplomatic relations.
However, there is a strong and persistent strain of thought that the benefits of PNTR will extend far beyond this. The claim has been made by proponents of the bill -- from President Bill Clinton to the Dalai Lama -- that allowing Beijing to join the WTO will transform Chinese society, turning China from an isolated, repressive regime into a democratic, peace-loving country with whom genuine partnership -- not the fiasco that currently masquerades under that name -- will be easy to achieve. A "side benefit" is that this democratic China would be less of a bully to Taiwan and the rest of the region.
This thesis rests on a simple chain of logic: free trade promotes economic growth, which leads to the development of a strong middle class, which will inevitably demand democracy. Empirical experience shows this to be relatively sound, since there are essentially no rich countries which are not democracies (Singapore can be discounted as a special case). Nevertheless, we should be beware of applying the analogy unthinkingly to China.
The first and most important qualifier is that China is still a very poor country. The democratic transitions in South Korea and here in Taiwan are most often cited as evidence for the theory. But in both these cases, the breakthrough only occurred after per capita incomes reached a level that will not be seen in China, even at current rates of growth, for decades. We should note that people have been predicting the "inevitable" political reform ever since Deng Xiaoping
Therefore, even taking the most optimistic assumptions, the promised change in its political culture is not likely to be achieved for a generation. In the meantime, China will be getting steadily stronger. This is not very heartening for those in the region, especially Taiwan, who are already feeling pressure from Beijing.
And there are less rosy scenarios. Social unrest in China shows no sign of cooling down and WTO entry, at least in the near term, is likely to widen the gap between the haves and the have-nots, raising the risk of internal disturbances that could derail economic development. And the rigidity of China's current political system means that a political crisis cannot be ruled out. The more extreme possibilities include civil war.
In short, PNTR and WTO entry will certainly bring economic benefits to China and its trading partners, including Taiwan, and they are to be welcomed. But we should not believe that they are a panacea for the many political and security issues that remain to be addressed.
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