How does the United States deal with the world's last communist stronghold? China is too big to ignore. But the Beijing government has violated human rights, sold arms to terrorist states; and discriminated against US trade at a cost of billions of dollars. Bush and Clinton agree that the best lever for dealing with China is "most favored nation" (MFN) trading privileges, which are granted on a renewable yearly basis. But they fundamentally disagree on how MFN should be used. BUSH

Uses the carrot of extending MFN to encourage concessions. Says if the US is serious about influencing the Beijing government it has to stay economically engaged with China. Points to concessions made by China as a result of US policy, including pledges to protect US copyrights and ban the sale of prison-made exports to the US. Insists that cutting MFN will only hurt the US economy and penalize the Chinese people, not the government.

Told Congress: "We have generated positive results without withdrawing MFN from China. Withdrawal of MFN would inflict severe costs on American business people, investors, and consumers. It would mean lost jobs and failed businesses in the United States." CLINTON

Brandishes the stick, insisting that the US should withhold MFN privileges unless China improves its human rights record and changes policy on arms sales. Says Bush squandered his bargaining leverage by renewing MFN without gaining concessions in return including the release of prisoners taken during the 1989 Tiananmen massacre.

Told a San Francisco audience: "When China cracked down on pro-democracy demonstrators, exported advanced weapons to radical regimes and suppressed Tibet, this administration and this president failed to stand up for our values.... We will link China's trading privileges to its human rights record and its conduct of trade of weapons sales."

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