WSJ : Engaging China Is Delicate Dance

Mindful of Congress, yet Needing Beijing on North Korea Problem,
White House Picks Fights Carefully

By JAY SOLOMON and GREG HITT Staff Reporters of THE WALL STREET JOURNAL May 18, 2005; Page A4

As anti-China sentiment rises in Washington, the Bush administration is caught in a complex balancing act: bashing Beijing enough to appease critics in Congress and stir action -- without provoking a trans-Pacific backlash.

The U.S. is exerting pressure on economic issues and criticizing China's human-rights policy and belligerence toward Taiwan, just as it is begging Chinese leaders for more help in curbing nuclear weapons in North Korea and hoping China won't cozy up to anti-American governments in places such as Venezuela.

"If we push too hard, this could cool China's ardor for helping us" on a number of issues, says David M. Lampton, director of China studies at the Nixon Center in Washington. Mr. Lampton says China also could potentially retaliate, for example, by shifting investments from U.S. dollar-denominated assets.

Complicating the White House calculus is soaring hostility on Capitol Hill, which some administration officials call "off the charts." Congress has largely deferred to President Bush's foreign-policy priorities, especially since Sept. 11, 2001, but China policy is one area where legislators are demanding a change of course, particularly on trade.

Nobody has felt that more than Treasury Secretary John Snow, who recently went to the Senate to testify about his department's budget and found himself in a hearing rife with anti-China anger. "China wants us to be a sponge for all their trinkets and trousers and shirts and shoes and all the things they produce, including high-tech, and yet, they don't want to open their market to us,"

Democratic North Dakota Sen. Byron Dorgan lectured the cabinet member, adding: "We sit around without the will, the nerve or the backbone to say this is nonsense; we're not going to put up with this anymore."

"Well, senator, I'm not at all happy with the situation," Mr. Snow responded. "There's a lot to be fixed there."

He stopped short of issuing a specific threat. And his report yesterday on Chinese currency practices continued that dance -- urging the Chinese to change their fixed exchange rate, yet not launching the process that could lead to direct retaliation.

The currency report came less than a week after the administration slapped new curbs on Chinese textile imports. The moves mark China's return to center stage of the American diplomacy debate -- a role Beijing assumed in the early days of Mr. Bush's presidency, before the spotlight shifted to terrorism and Iraq.

Officials across the administration are reviewing China policy. Rob Portman, the new U.S. Trade Representative, is making "market access" the focus of a fresh examination of economic policy toward the mainland. Among the issues under scrutiny: whether the U.S. should make more aggressive use of sanctions, such as antidumping laws, to control trade practices. His office's experts have begun what Mr. Portman describes as a "top to bottom" review of the agency's China policy.

Within the White House, officials are discussing broadening the China policy review launched by Mr. Portman to encompass the Treasury and Commerce Departments, which share in policy making on trade and international economics. A decision could come in a few weeks.

That study comes as the State Department is preparing separately to open talks with China that will focus on what one U.S. official called the "nexus between economics and national security."

Deputy Secretary of State Robert Zoellick will lead the talks, expected to begin this summer in Beijing. The dialogue was requested in the fall by Chinese President Hu Jintao, and the White House has embraced the forum in hopes of developing a mechanism through which to engage Beijing on issues such as energy prices and human rights.

It has been a long time since President Bush or his chief diplomatic aides provided a comprehensive, public articulation of the administration's China policy. Privately, officials list certain principles and say they see China falling in the netherworld of neither adversary nor ally.

To explain policy coordination across multiple issues, some officials invoke the image of a highway with separate "lanes" and say U.S. action in each lane is largely taken on its own merits, without talks crossing into other lanes.

Officials see five separate lanes: economic, including issues such as trade, currency and intellectual property; China's human-rights record; Beijing's help in containing North Korea's nuclear program; the situation in Taiwan; and China's growing international influence.

As the recent actions on currency and trade show, the economic lane is the most contentious. Last year, the U.S. ran a bilateral trade deficit of $161.97 billion with China and is on pace to smash that record in 2005.

Beyond trade, Mr. Bush made a point yesterday of saying upon swearing in Mr. Portman that his new aide "will work to ensure that China stops the piracy of U.S. intellectual property."

The concern isn't just about counterfeiting of movies and music; it extends to a range of U.S products, such as pharmaceuticals, autos, entertainment, software and branded apparel. The administration recently moved closer to imposing sanctions over the issue, placing China on a "priority watch list" of offenders.

While the U.S. talks of more cooperation with China in noneconomic issues, there is concern inside the Pentagon and White House that Beijing's global ambitions could bump up against U.S. interests. Many American officials are unnerved by trips made last year by Chinese leaders to Venezuela, a country whose leadership is often at odds with Washington.

Beijing's influence has grown with free-trade agreements it has signed with a number of East Asian and commodity-exporting countries. China also has been able to gather support by engaging some foreign governments that were facing international isolation because of alleged human-rights abuses.

Chinese officials periodically try to cross lanes -- telling U.S. officials they may curb American imports, for example, if the U.S. continues to sell certain arms to Taiwan. American officials respond that if China crosses lanes, then Congress will force the same -- tying trade sanctions, for example, to human rights. So far, the threat of invoking Congress has worked for the administration.