U.S. Threatens Economic Sanctions Against China

Despite concerns about Washington’s already tense relationship with Beijing, the Clinton administration has warned China that it risks the imposition of stiff economic sanctions in the next few months because Beijing has ignored previous warnings and continues to violate a key trade agreement signed a year ago.

The warning, made after a series of White House meetings in recent days to reassess the administration’s China policy, comes despite considerable concern from some officials that prompting a confrontation over China’s piracy of American software, music and videos could harm Washington’s effort to defuse growing tensions between China and Taiwan.

Those officials also fear that the trade dispute could hamper American efforts to convince the Chinese that they must end their crackdown on dissidents and stop the sale of missiles and other military hardware in South Asia and the Middle East.

But in the end, Clinton’s economic and trade advisers, led by Mickey Kantor, the trade representative, convinced the White House that American credibility with China and other trading partners around the world would be jeopardized if Beijing is permitted to flagrantly ignore its agreement to close more than 30 compact-disc factories - some apparently controlled by the Chinese military - that are exporting millions of dollars worth of illegal copies of American products.

Kantor has warned China that the sanctions could be as large as 100 percent tariffs on more than a billion dollars in Chinese imports. But White House officials, still nervous about how hard to press Beijing, say they will not determine the exact nature of the sanctions, or their timing, until completing the negotiations that begin in the coming week.

Three months ago, Kantor issued a less specific, public threat of sanctions against China in hopes that Beijing would act against the factories making the pirated copies. Unsatisfied with the response, he went back to the Chinese on Wednesday to insist that time was running out.

Some aides to Clinton concede that election-year politics may color the decision over how hard a line to take. There is growing concern in the White House that Clinton’s policy of “comprehensive engagement” with China - and the decision two years ago to extend China’s favorable trade benefits independently of its human rights record - has shown virtually no results.

That would provide Sen. Bob Dole and other Republican presidential aspirants with an opening to tar Clinton with the same charge that Clinton made about George Bush four years ago: that he is coddling the Chinese Communist leadership under pressure from American business interests.

The issue of China’s piracy is particularly potent in California, the most critical state in the November election. Hollywood has lost millions of dollars because of the illegal replication of movies and music, and many of the plants that once churned out compact discs have converted to much more lucrative products - illegal copies of computer software.

Kantor, a longtime political operative in Southern California and Clinton’s former campaign manager, is close to many of the executives in that industry.

On Wednesday, in a speech carefully reviewed by the National Security Council and National Economic Council, Kantor declared to the U.S.-China Business Council, a private group that represents American businesses in China, that the United States will “take decisive action if China does not meet its obligations.” And he warned, “We will not wait forever.”

In other forums, Kantor has said Washington would impose a larger sanction than the one it threatened a year ago but suspended when China agreed at the last moment to sign an accord promising a crackdown on the piracy of American products. The new sanctions are justified, he said, because China “is not only selling these goods in its own market, it is beginning to sell them around the world.”

The same day that he gave the speech to the Business Council, Kantor delivered a similar warning to China’s ambassador to the United States, Li Daoyu. And it is to be repeated in coming days, when one of Kantor’s deputies begins the 17th round of talks with Chinese trade officials in Beijing over enforcement of the accord.

Deputy Foreign Minister Li Zhaoxing is due in Washington from Monday to Wednesday for an as-yet-unannounced visit in which he is expected to meet high-ranking American officials from the State Department and the White House.

Some Asia specialists in the State Department disagree with Kantor’s aggressive strategy, as does Deputy Treasury Secretary Lawrence Summers, who at a recent White House meeting questioned whether it was worth jeopardizing America’s huge interests in China “over the copyright on Mickey Mouse.”

Several China experts have warned that in China’s view the threat of sanctions is an attempt by the United States to “contain” what is fast becoming the world’s second superpower.

But Kantor has argued the opposite: that China will only respect American toughness - on Taiwan, human rights and other issues - if Washington does not back down when it comes to enforcing previously negotiated agreements.

Senior officials say Kantor’s strategy has been approved by Secretary of State Warren Christopher and by Treasury Secretary Robert Rubin. But at least one participant in the meetings recalled that “the issue has to be pursued with some balance,” one reason that Kantor has not set a date by which China must destroy the factories or enter into licensing agreements to make their products legitimate.

“You hear the argument a lot that we should not be retaliating now,” said Gregg Mastel, a China scholar at the Economic Strategy Institute, a Washington trade and economics think tank. “But it is clear that the Chinese are testing our credibility on intellectual property. They don’t want to crack down on this gravy train, but they will do it if they fear it threatens their lifeline: exports.”