At risk in China dispute: business

China passed Japan last year as the biggest US soy buyer.

As he watches the spy-plane standoff with Beijing drag on - amid loud threats of trade sanctions from Congress and calls in China for boycotts on American goods - Illinois soybean farmer Dwain Ford is worried.

Busy tilling his 1,700-acre corn and soybean farm for spring planting, Mr. Ford knows where he must sell a big chunk of his crop: down the Mississippi River, through the port of New Orleans, to China.

"We have to have the export markets," says Ford, noting that China this year outpaced Japan to become the No. 1 buyer of US soybeans and soybean products, with $1 billion worth sold since Sept. 1.

From Illinois to Florida, and Pennsylvania to California, American businesspeople like Ford are anxious onlookers in a diplomatic tussle that US officials warn could derail a vibrant US-China commercial relationship - dashing hopes for lucrative new markets once China enters the World Trade Organization (WTO).

"If this becomes a full-blown crisis, there is a possibility that investment and trade relations will be damaged," says Myron Brilliant, Asia manager for the US Chamber of Commerce.

"We have far too important a relationship - economic and otherwise - to allow this incident to broaden into a deeper crisis," he says, adding that chamber representatives and other US executives are engaged in a "dialogue" with Bush administration officials over the standoff.

Yet in Congress, even some staunch China-trade backers say they'll reverse course and vote against an extension of trade privileges for China unless Beijing swiftly returns the US Navy spy plane and the 24 American crew members detained since the plane collided with a Chinese fighter on April 1. Last week, nearly 30 lawmakers moved to cancel Beijing's trade benefits.

"The relationship is being damaged," Secretary of State Colin Powell said in a television interview Sunday. In the past week, US officials and lawmakers have called off China trips, dinners with Chinese diplomats, and announcements of China-related business to protest the holding of the crew. Mr. Powell stressed that "this situation has not improved [China's] chances of winning that [normal trade status] again."

The powerful US business lobby, often an outspoken advocate of advancing China trade, has issued muted expressions of concern to avoid any appearance of placing profits before the interests of American servicemen and women. Privately, executives have criticized the Bush administration's initial handling of the dispute as overly strident and America-centered.

But American entrepreneurs are also reacting to the standoff with a sort of "pinch me" disbelief, partly because they are not convinced that the political whirlpool swirling around the incident will be strong enough to drag down the surging US economic relationship with China.

"The economies of the United States, China, and Taiwan are so closely intertwined with one another - there is no way all this can suddenly stop," says Jim Shipley, vice president for marketing of Trading Wise Inc., an Orlando, Fla., firm that facilitates US business in China.

Over the past decade, total US-China trade multiplied nearly sixfold to reach $116 billion in 2000, according to the US Commerce Department. Today, the United States has emerged as China's top trading partner, as Chinese exports here last year ballooned to $100 billion worth of toys, shoes, clothing, electrical machinery, and other goods. American companies were also the source of nearly half of the $40 billion in foreign direct investment in China in 2000.

China, meanwhile, is one of the biggest growth markets for US exports, which tripled over the decade to $16 billion worth of commodities including air and spacecraft, power generation equipment, machinery, fertilizer, and oilseeds such as soybeans. Exports of US services such as banking have also expanded by an average of 18 percent a year since 1993.

Indeed, just as Chinese firms rely heavily on US markets, the China market is now vital for many US entrepreneurs such as Ford, who, like thousands of US farmers, is facing record yields and rock-bottom prices.

"Almost every other row of soybeans that grow in the United States is exported," Ford says from his Kinmundy, Ill., farm, 100 miles east of St. Louis. "Exports are almost double what they were last year, and China is half that market," says Ford, who also handles trade policy for the American Soybean Association.

Once a net exporter of soybeans, China is now a net importer, Ford says, pushing US exports of the crop to record levels, propping up sluggish $4-a-bushel prices, and easing the trade deficit.

US entrepreneurs anticipate that China's entry to the WTO will bring about even stronger and broader linkages between the US economy and China's market of 1.3 billion people. American firms, as well as Chinese officials, lobbied hard for Congress to pave the way for China's WTO accession by granting Beijing permanent normal trade status.

Once China gains WTO membership, the US would benefit from lower Chinese tariffs and unprecedented access and distribution rights in Chinese markets. China is also expected to benefit from expanded, more stable trade ties as well as the speeding up of market reforms designed to make its economy more efficient and competitive.

"We are all hopeful that this can be resolved, and we can make a push for China's WTO entry," says Mr. Brilliant.

Despite all the tensions, so far, most US firms are enjoying business as usual. "We are not concerned that the political problems with China will affect our business," says Charles Glazer, spokesman for Kennametal Inc., a Latrobe, Pa., toolmaker that owns a plant in Shanghai with 100 Chinese employees.

(c) Copyright 2001. The Christian Science Monitor

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