Twisting Off the Hook

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Clinton, however, is unlikely to extend MFN without any conditions. The President boxed himself into a corner a year ago by issuing an Executive Order that made any extension of MFN past June 3 dependent on "significant progress" by China on human-rights issues. Given the meager improvements so far, Clinton & Co. are not going to find it easy to make a plausible case to the human-rights lobby -- or the American public. In a TIME/CNN poll conducted last week, 62% of respondents felt that encouraging human rights in China was more important than trade, and 60% said the U.S. should require China to show more progress before renewing MFN. In the view of experts such as Douglas Paal, president of the Asia Pacific Policy Center, the President can contend that Beijing has made such progress only by telling "lies."

The betting now is that Clinton will couple a general continuance of MFN with some largely symbolic exceptions. One idea is to raise tariffs sharply on products made by Chinese state-owned industries or factories controlled by the People's Liberation Army. Clinton could claim that he is penalizing Beijing without hurting China's private entrepreneurs.

Noordin Sopiee, head of Malaysia's Institute of Strategic and International Studies, dismisses partial sanctions as "a compromise which will satisfy no one and will merely strengthen Clinton's image as a wishy-washy leader. It's a crazy idea, and it won't work." American experts agree; Lyn Edinger, a former commercial counselor at the U.S. embassy in Beijing, says, "Targeting state enterprises will be a nightmare and virtually unenforceable." The owners of many Chinese factories are a mixture of private, state, military and sometimes even American interests; figuring out which companies to penalize could drive the U.S. Customs Service insane. Assistant Secretary of State Winston Lord has suggested targeting specific products instead. But with a few exceptions such as assault rifles, it is not easy to discern which ones come from state or army enterprises.

Beijing's leaders are, like Clinton, prisoners of their past rhetoric. They have insisted so loudly on extension of MFN with no conditions that they might have to retaliate against even pinprick sanctions. Washington expects dollar- for-dollar revenge: if the U.S. restricts $1 billion worth of Chinese imports, China would take some kind of action against $1 billion in U.S. goods or services. The U.S. would suffer far more: $1 billion lost would amount to 11.4% of the $8.8 billion annual U.S. sales to China, but only 3.3% of the $30 billion China sells each year to the U.S.

Any retaliation might threaten a market for U.S. exports in aircraft, telecommunications equipment, wheat and other food products that is expected to grow enormously in coming years. Chief executives of seven of the biggest U.S. companies doing business with China signed a letter to the President estimating that "in 10 years our cumulative sales to China will reach $158 billion, assuming normal relations." Clinton evidently got the message: in discussions with his advisers, he repeatedly ticked off the exact dollar losses for Boeing and McDonnell Douglas airplane makers -- and the electoral votes he could put at risk in states crucial to his re-election.