Cover Story

Trading places

China is six months past its own target date to enter the World Trade Organization but still intent to prove it can liberalize its economy without liberating its people

Issue: "Trading places," June 30, 2001

in Sichuan Province-John Lee's countryside is two hours by car from the nearest city, along a superhighway that is only 4 years old. Recently a Hong Kong businessman purchased the freeway from the provincial government and threw up banks of toll booths with the generosity of a Vegas slot machine vendor. Beijing is 1,500 miles away. Capital investment and the kinds of skyrocketing growth so touted in China's large cities rarely make it here. Local government officials are eager enough for infrastructure (or a little lining in their own pockets) that they pawn public works for cash. Wealthy Asian businessmen are so eager for a toehold, anticipating a day when the province takes off economically, that they will buy in. The rural county where Mr. Lee was born has 750,000 people, living as densely as 1,000 per square mile. Terraced fields jam the landscape. Smoke hovers where farmers are burning off dead crops to plant again. Electric lines stretch over the mountains in a singular sign of post-rural development. When outsiders think of China, the image that most comes to mind is endless crowds jamming Beijing's Tiananmen Square or the throbbing neon of Shanghai's financial district. But 80 percent of mainland China's 1.3 billion people live in rural provinces like this one. Mr. Lee's old home here is a crumbling brick two-story surrounded by rice paddies, cabbage rows, and ducks. In winter, rain and wind blow hard enough to turn faces into shoe leather. When cold weather comes, farmers move their livestock and hay indoors alongside the family cots. In summer a high sun burns into the shoulders of young boys already stooped against the daily weight of water buckets swinging from bamboo poles. Capitalism may be everywhere apparent in the urban centers, but communism is still working its decay in the countryside. Local party officials have hired smart chamber of commerce enthusiasts to show promising sites to foreign investors, but the ruling elites keep a chokehold on business development, education, and farming. Year-round beginning about 5 a.m. each morning in this county, a distant megaphone bellows state propaganda across the terraced fields, slogans harking back to the era of Chairman Mao. The broadsides of several buildings in the townships are painted with one-child policy reminders: "Family planning is your security!" Not only a local phenomenon, the gap between city and country-both economic and social-is pulling apart China's hopes for winning entrance into the World Trade Organization this year. Backward policies on agriculture and slow progress in rural areas are the main reasons. Chinese officials have asked to be categorized as a developing, or Third World, country when it comes to meeting the WTO's agricultural trade standards-an admission that the country's rural economy lags far behind its other economic sectors. WTO status for China has broad implications: China would lower its tariffs and import quotas. It would import computers and other technology duty free. It would increase imports of grain, cotton, and soybeans, along with ending export subsidies on agricultural products. It would open the telecommunications market and banking to foreign investment. The United States and other Western negotiators insist that the WTO classify China as a developed nation in all categories because they do not believe one sector of China's economy should be treated differently. They also want China to lower agricultural subsidies, particularly since it fields the largest rural labor force in the world. The stumbling block has important implications for U.S.-China relations. When U.S. lawmakers last summer agreed to make permanent China's trade status with the United States, they conditioned it on China's entry into the WTO by this month. The failure to accede to WTO standards is prompting Congress again to review American trade status with China. That debate always raises broader issues between the two countries, including China's record on human rights, population control, and religious freedom. Earlier this month, President George W. Bush formally asked Congress to extend China's normal trading status one more year. The request was no surprise to lawmakers. What is surprising is that China has dragged its feet on meeting the WTO mandates. Last year the state-owned press regularly presupposed WTO membership could be in hand by early 2001. Western experts, too, believed China would be part of WTO by this time. Now the optimists say the country may not join the WTO until the end of this year. A trip through the countryside makes it easier to understand why. Isolated and undeveloped, these rural areas are worse off than they were 20 years ago, according to Mr. Lee and other residents. A young man then, and now, could reach adulthood without ever traveling more than 20 miles from his home. Bicycles are and have always been rare. Schooling had to fit around two yearly crops of wheat. Locals remember Mr. Lee by a nickname meaning something like "army" in Chinese. That kind of determination and a quick mind caught the attention of more than one teacher, who boosted his education and eventually helped him gain scholarships to study overseas. He attended universities in the West, eventually becoming a scientist and an American citizen. Over the years Mr. Lee has watched as his birthplace has fallen further behind. Education, in particular, is hurting. School fees range from $60 to $180 a year. Farming families that once sent every child to school now can afford to send only one, if any. Teacher pay, amounting to about $65 a month, is dependent on those fees. When enrollment figures drop, teachers are paid even less. When Mr. Lee attended school here, "the government put more money into schools," he says. "But now they spend it on other things or they don't have much to begin with." Some schools remain vibrant despite declining resources. The high school Mr. Lee once attended today takes students 70 to a class for 12 hours of study a day. Flagging resources is one of the reasons for the intensified program. "Poverty is our stumbling block," says one student. "Poverty is also a good teacher to us." Buoyed by new faith in Jesus Christ and yearning for his old home to move forward, Mr. Lee raised money in the West to help poor but promising students. Local officials, no matter how tied they are to the party line, are desperate enough for cash to embrace this kind of public works project. Strategically, Mr. Lee views teachers as the vast rural population's intellectual force, and channels Western charity their way via a scholarship fund. "If you can reach them, you are reaching other people, too." But he is cautious to work within the system, cautious enough not to want his given name or details of the work revealed in the American press. He is making aid available to every school in the county but no one gets a full ride. The scholarship fund is modest-it supports about 200 students from 20 schools in the county-but any outside help is unprecedented. "I am careful not to foster abject dependence," Mr. Lee says. What he is doing already has eased the local dropout rate, boosted teacher morale, and left less room for bureaucrats to abuse the system. Remote grassroots programs like this are among the long-term gains free-trade advocates hope to see once China enters the WTO and plays by the more open rules of its global trade partners. "Among the rights that people have to life, liberty, and freedom of religion, is also the right to property and economic initiative," says Acton Institute president Robert Sirico. "Admitting China to the WTO will signal a much-needed normalization of relations and give us the best hope for influencing the political and moral direction of the country. I don't think anyone benefits when domestic or international bureaucrats, who have their own axes to grind, determine for entrepreneurs and ministries whether they can or cannot approach people inside a foreign country for commercial and cultural exchanges." The question is how deeply those benefits will reach average workers, teachers, and students. Teachers in this province say that not only have their wages been falling, the government also gives them no way out. Once assigned a slot in the system, few may even change schools. Free-trade skeptics say that without the political freedoms that allow more of China's vast work force to respond to market impulses, economic progress will stagnate. WTO membership "may provide some improvement in opportunities but at conditions that approximate slave labor," says Steven Mosher, head of Population Research Institute. "Middlemen in Hong Kong and Taiwan will profit, but for the average working person it is another picture. They cannot protest, form unions, cannot even establish employee-relations groups." China's missed targets on WTO, he says, are another example of the government's unwillingness to negotiate in good faith: "They promised more than they were willing to deliver." Aware of those problems, free-trade advocates like Rev. Sirico maintain, "It is preferable to prod Chinese communists to behave more like capitalists in freeing up trade than to ask capitalists to behave more like communists in restricting trade." In Washington, lawmakers have 30 days to review and vote on the president's request for normal trade and possibly even to revoke it. A few months ago, with the Beijing government holding a Navy EP-3 spy plane and its crew, appetites for getting even were running high on Capitol Hill. Now, with the plane remaining in Chinese hands (though China promises to return it in pieces in the next few weeks), retribution fever is dying. A canvass of House members who oppose extending normal trade privileges indicates that they expect to pick up no more than one or two dozen votes for their side. Given the size of last year's vote in favor of trade with China, that is not enough to change the outcome. With the present tension in relations, the muted response is surprising. Chinese and U.S. diplomats have squabbled over how to get the EP-3 back to its rightful owners. They have disagreed over U.S. sales of weapons to Taiwan. President Jiang Zemin took on his counterpart in the White House directly last month, telling a gathering of senior Politburo members that Mr. Bush was "logically unsound, confused, and unprincipled, and unwise to the extreme." Out of the headlines, China has detained a record number of U.S.-based scholars (see sidebar). It has also ratcheted up its campaign against members of the religious sect Falun Gong, as well as unregistered Protestant and Catholic churches. In the countryside, where daily bread is what matters most, opening the way for entrepreneurs and good Samaritans alike will require ample amounts of both political reform and trade restructuring.

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