Business and Human Rights

THE current debate over extending most-favored-nation status to China misses the central issue: The question is not really whether human rights are more or less important than private economic gain. The former (personal freedom) is a fundamental end, while business profits, and even jobs, are basically means of improving people's welfare.

The desire to promote a greater degree of freedom for the 1.2 billion people in China is compelling. But the serious and practical question is: What is the most effective way of helping the Chinese people achieve more freedom?

Judging from China's response to Secretary of State Warren Christopher's recent trip to China, the threat of economic punishment does not work. Given the history of occupation by Western powers and Japan, China's government is understandably touchy on the subject of infringements on its sovereignty.

But that is not an excuse to ignore the subject of human rights. Rather, we need to identify the sensible ways for China to improve its track record. Here we can benefit from examining the recent experience of some of China's neighbors.

At the end of World War II, South Korea and Taiwan were governed by dictatorships that severely restricted the liberties of their citizens. But both countries promoted private enterprise, even in the absence of political freedom.

Westerners take the opposite view, that political freedom is paramount and economic freedom will follow. Yet we reluctantly have to admit that this approach has not worked too well in Russia in the last few years. The loosening of restrictions on personal liberties there, however welcome, apparently has not been satisfying to a people suffering substantial economic deprivation.

The situation in Taiwan and South Korea has been different. There, greater economic freedom has led to a tremendous growth of the economy and attendant rises in the wealth of the people. The rise of strong private enterprises by themselves represented a substantial decentralization of power in those societies. Also, the development of a middle class, characteristic of a capitalist economy, has generated pressures for political liberalization. In turn, there has been important movement toward democratic structure in those nations.

China has been following this ``Asian model'' to a degree. It has embarked on selective liberalization, mainly in special economic zones in coastal regions. Large foreign investments have been permitted. The resultant rapid economic growth has led to some decentralization of power. Though the personal freedoms available to the Chinese people are surely extremely limited, the creation of wealth in the new zones apparently has led to some loosening of the severe limits on personal liberty.

As the liberalization accompanying the formation of special economic zones extends farther inland, the private sector's role in China will continue to expand. Moreover, foreign investment brings new ideas, ranging from technological to cultural. The result is likely to be a gradual but important movement away from a totalitarian or authoritarian society.

In contrast, removal of MFN treatment by the United States might interrupt the liberalization now underway in China. As for economic damage, the major victim proportionately is likely to be Hong Kong, which is the major entrepot for the flow of goods and funds to and from China. Here at home, that removal of MFN status would be a victory for domestic protectionists who always advocate the restriction of imports into the US - regardless of the adverse effect on other, exporting industries.