UNITED STATES relations with China have deteriorated since the 1989 crackdown on pro-democracy protestors. We face tough decisions on China policy during the coming months. In response to the crackdown, the US, Europe, and Japan suspended trade programs and military cooperation. Multilateral loans were blocked. China's leaders subsequently eased some repression and resumed limited economic reform. They also supported the Persian Gulf coalition. Many countries lifted some sanctions.
Four factors will influence China's future: the scope of reform, the leadership transition, the shift of power to the provinces, and the end of the cold war. China's key internal issue is economic reform. But reform threatens stability. China's aging leadership wants to reap the short-term economic benefits of reform and trade, without the long-term political consequences.
New leaders might be able to accelerate reform. A power struggle between hard-liners and reformers over whom will next rule China has reached a critical point.
China will also be influenced by the shift in power to the provinces. This trend was set in motion during the 1980s, when Beijing permitted provinces to retain a share of tax revenues and make their own foreign trade and investment deals. Provinces now sometimes defy central government economic directives.
The end of the cold war has important consequences for China's relations with the West. The decline of the Soviet threat has reduced China's value as a strategic ally. As a result, Western countries are taking firmer positions with China on issues of concern.
Inside China, we would like to see economic reform and peaceful evolution toward democracy. In its foreign relations, we want China to support stability in Asia and other regions. Reform and security cooperation will suffer if we disengage. They will also suffer if we do not press our concerns more strongly.
What are these concerns? First, Americans are troubled by the denial of many basic political rights in China and Tibet. Second, China appears to be using sales of unconventional weapons and technologies to acquire money and influence. Third, our trade deficit with China - $10 billion in 1990 - is in part the result of unfair trading practices.
Trade is the most pressing issue. President Bush must decide by June 3 whether to renew most favored nation (MFN) trading privileges for China. China needs trade to obtain technology and foreign exchange crucial for its development. Congressional displeasure with Chinese trade and arms policies has increased the chances that MFN will be revoked this year.
Revoking MFN would strongly convey our opposition to China's policies. But US-China relations could nose-dive. Suspending MFN also could retard rather than promote reform. Economic interaction is a key source of exposure to Western values.
For these reasons, revoking MFN could be counterproductive. We might want to hold this step in reserve while we exert other pressures on China. President Bush has cited China for illegally copying US pharmaceuticals, software, and chemicals. We can retaliate if China does not end these practices.
If China fails to make progress on human rights and arms transfers, we could reimpose sanctions lifted last year. We could also restrict high-technology sales.
On human rights, we need to be more forceful. Bush's decision to meet last month with Tibet's exiled spiritual leader, the Dalai Lama, sent a strong signal of US opposition to Chinese policies in Tibet.
To enhance the longer-term prospects for reform and democracy, we should try to increase contacts with reformist elements, especially in the military. On weapons proliferation, we should investigate reports of the transfer of missile technology to Pakistan and Syria and nuclear technology to Pakistan and Algeria.
A hostile relationship would not be in our interest, because we want China's cooperation on security and trade. If we disengage economically, we may also undermine long-term reform prospects. The end of the cold war enables us to press our concerns more strongly, though. We have economic leverage and should use it.