China Trade: Boon for the Environment

Published December 1, 2000

President Clinton granted Permanent Normal Trade Relations (PNTR) status to the People’s Republic of China on October 10, less than one month after the Senate voted 83-15 to approve the measure. The House had passed the bill, H.R.4444, by a 237-197 vote in May, despite intense opposition from labor unions, environmentalists, and religious groups.

Many observers consider the bill the most important trade legislation since the 1993 North American Free Trade Agreement. PNTR status paves the way for China’s entry into the World Trade Organization and opens China’s vast market to U.S. products.

When China enters the WTO next year, it will be expected to significantly cut its tariffs and grant U.S. firms and others the right to establish distribution points within the country. China also will be required to open its financial and service sectors, including Internet and telecommunications development, to international competitors.

Anti-trade environmental groups, such as Friends of the Earth and Sierra Club, argued that like NAFTA, the China measure would encourage U.S. companies to move manufacturing operations to China, where environmental standards are significantly more relaxed than those in the United States. Clinton addressed those concerns with the following statement.

When China finishes its negotiations and joins the WTO, our high-tech companies will help to speed the information revolution there. Outside competition will speed the demise of China’s huge state industries and spur the enterprise of private sector involvement. It will diminish the role of government in people’s daily lives. It will strengthen those within China who fight for higher labor standards, a cleaner environment, for human rights and the rule of law.

Public policy consultant Wendell Cox was more direct. “If there is one thing that is clear from recent world history, it is that cleaner environments are associated with increased affluence,” he said. “The most reliable means for improving China’s environmental performance is for that nation to move from a level slightly above subsistence to affluence. To the extent that Western firms can contribute to that effort through the location of plants in China, the entire world will benefit.”

Indur Goklany, the Julian Simon Fellow at PERC, agrees. “Trade can save China’s environment. It also has the benefit of giving countries incentives to live in harmony, reducing the risk of conflict between these giants.”

A boon for farmers, too

With a population of 1.2 billion and a poor system for optimizing agricultural production, China may become the very market U.S. agriculture needs to bring American farmers out of a long recession of declining prices and increasing government subsidies.

Trade will also help the Chinese poor. Notes Goklany, “over the last 40 years, internal and external trade, supplemented by aid, enabled food to move from surplus to deficit areas and improved global food security. Trade essentially globalizes sustainability, providing nonproducers with faster, easier, and cheaper access to food.”

The growing trend in China toward adopting household pets to keep company in the required one-child family will by itself create a major opportunity for American farmers to fill the country’s escalating pet food demand in the next decade.