U.S. AND CHINA CLASH OVER HUMAN RIGHTS

This month's collision between the U.S. and China over trade and human rights creates dilemmas for both countries. And the oil and gas industry sits squarely in the center.

China is a rapidly opening, rapidly growing market for oil, gas, and related materials, services, and technology. Economic liberalization is unleashing the pent up aspirations and energies of 1.3 billion people. The economy is growing at the rate of 13%/year, oil consumption at 6 8%/year. The country, which in 1990 exported 500,000 b/d of oil, has become a net importer and by 2000 may need 2 million b/d of foreign crude and products. The government is offering onshore exploration and development rights to foreigners and thinks refining capacity by 2000 will have to increase by 41%, to 4.66 million b/d. The oil and gas industry thus views China as a huge opportunity. Other industries see it the same way.

But the Chinese record in human rights is poor. The world witnessed the government's toleration for dissent 5 years ago, when tanks rolled into Beijing's Tiananmen Square to crush demonstrations held in support of democracy. The death toll, according to some estimates, reached into the thousands.

JUSTIFIED OUTRAGE

Beijing hasn't mellowed much since its heavy handed Tiananmen performance, in response to which the U.S. subjected China's most favored nation (MFN) trade status to annual review. So it was not without justification that U.S. Secretary of State Warren Christopher traveled to China aglow in idealistic outrage. Christopher threatened to swing the MFN bludgeon, and Beijing responded by arresting more than the usual number of dissidents prior to the National People's Congress.

Both sides are wrong. Chinese officialdom no doubt sees the conflict as trade vs. state authority. And history suggests that it will sacrifice trade to sovereignty any day. Concern about human rights, if it exists at all, remains subordinate to nearly everything else. That's wrong, but that's how it is.

So Christopher was right to press the human rights issue but wrong to stake trade to it. Casting the issue as trade vs. human rights means little to the Chinese and leaves no constructive option. If Christopher caves on MFN, critics will charge that he sold out human rights to commercial interests. If he limits trade between China and the U.S., he hurts both U.S. economic interests and Chinese people struggling to improve their standards of living.

TRADE POSTURING

The Clinton administration can't afford to compromise trade. The President who last year championed trade freedom to win passage of the North American Free Trade Agreement cannot now restrict trade with an awakening commercial giant. Indeed, while Christopher was threatening to revoke China's MFN status, Deputy Energy Sec. Bill White was telling a Senate committee about trade restrictions that endanger the 65% share U.S. firms now hold of the Chinese market for oil field technology. But if all this made Christopher's trade posturing seem hollow, Beijing's bluff looked cavalier. China needs trade with the U.S. more than the U.S. needs trade with China.

The U.S. should find a way to promote human rights without flouting trade. The strategy tends to carve token ideological triumphs out of real human welfare. For its part, Beijing must not underestimate the American propensity to make bad moves for good reasons. History suggests that Americans take human rights seriously enough to sacrifice much in their pursuit. China's leaders need to learn that people serious about business pay close attention to how others perceive them as partners.