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State's products may pour into China, which means 'jobs, jobs, jobs'

Tuesday, November 16, 1999

By ARTHUR C. GORLICK Mail Author
SEATTLE POST-INTELLIGENCER REPORTER

A breakthrough trade agreement that could open China and its immense population to Washington state products and services drew cheers yesterday from the state's business and international trade leaders.

Boeing and Microsoft are obvious big winners of improved trade with China, but the deal also will have broad-ranging effects on the region's heavily trade-dependent economy.

"It's great news for Washington state," said Martha Choe, former Seattle city councilwoman who now heads the state's Department of Community, Trade and Economic Development. "This is a big step toward leveling the playing field for just about every sector in this state's economy. . . . It means jobs, jobs, jobs."

China already was the state's No. 3 trading partner last year, trailing only Japan and Canada with almost $12 billion in two-way trade, said Tong Gagliardi, director of the trade department's China programs.

It also received nearly $4 billion in goods originating in Washington state, fourth-highest of any nation, she said.

"With its membership in the World Trade Organization, that will offer even greater benefits to the state," Gagliardi said.

"And it will offer benefits for China, too. It will provide an external force that will help keep them on a reform path. They will have to become more transparent, and their state-owned companies will have to change as they face foreign competition," she predicted.

China was already on a course to increase its trading presence at the Port of Seattle next month, said the port's Executive Director Mic Dinsmore.

He returned Friday from a weeklong trade mission to Beijing and the port city of Shanghai and told the Post-Intelligencer that China Shipping Group will begin weekly service at the Port of Seattle's Terminal 46 beginning Dec. 9.

There will be six vessels in the service, the second Chinese shipping line to operate in Seattle's harbor, Dinsmore said. China Ocean Shipping Co., or COSCO, has been operating at the Port of Seattle since 1949.

"This will mean increased volumes of trade between the United States and China through our port," Dinsmore said. "The timing of the agreement for China to enter the World Trade Organization couldn't be better."

But the new agreement, which still faces the hurdle of getting Normal Trade Relations status (formerly Most Favored Nation status) from Congress, won't bring about instant change.

Before the vast China market opens for Washington state's products, China must reach trade and membership agreements with the European Union and other countries, said Joseph Borich, executive director of Seattle's China Relations Council.

It also must change its own laws to conform to international standards, lowering tariffs and halting practices that excluded foreign goods without sound reasons.

"Then, important new markets will open for our products and services," Borich said. "It will be a huge boost for our manufacturing, financial and agriculture sectors as various aspects of the agreement are phased in."

It should provide China with finances to improve its technology and secure its economy and allow for the purchase of Washington state products, he said.

That should offer opportunities for The Boeing Co. and other state industries.

"It opens up vast new markets for U.S. goods and services, and I have supreme confidence that America's highly skilled and productive work force will win substantial new business in those markets in the years to come," said Boeing Chairman Phil Condit, in a prepared statement.

"Congress now must act with dispatch to grant China the same Normal Trade status the U.S. has granted to more than 100 other nations so that the U.S. can reap the full benefits of this market-opening agreement," Condit said.

Microsoft Corp. has operated in China since 1992 and has sales offices, a regional support center and research center there, said Erin Brewer at the Redmond-based software giant.

"We have always supported granting Normal Trade Relations status and entry into the WTO for China," Brewer said. "From our perspective -- and from the technology industry's perspective -- we feel it benefits both the United States and China and helps assure that China's information technology sector is healthy and robust."

Perhaps feeling the least initial benefit of the new agreement is the state's agricultural sector.

Under the U.S.-China trade deal, tariffs on agricultural products will fall from an average of 15 percent to only 14.5 percent immediately and China will also eliminate all export subsidies supporting its agricultural products.

But Washington state agriculture exporters and experts say they hope the agreement will lead to China's tariffs eventually being reduced substantially, allowing greater access to Chinese markets.

They also believe that the WTO's mechanisms will provide a structure that will allow for resolution of trade disagreements and fair competition with Chinese agricultural producers.

The state's agriculture sector stands to make big gains if China achieves trade organization membership. Washington apples, cherries, pears, wheat and other products routinely make their way to China.

"Wouldn't we love to sell an apple a week to each of the 1.2 billion Chinese?" commented Patricia Davis, a Port of Seattle commissioner and president of the Washington Council on International Trade. "I think this will eventually open markets that have not been open before and help China make needed reforms. And all the industries mentioned in what I've seen of the agreement are the key industries of this state's economy."

The agreement would lower tariffs on agricultural imports and require China to have sound, scientific basis for excluding Washington farm products, said Desmond O'Rourke, director of Washington State University's International Marketing Program on Agricultural Commodities and Trade.

"If China is admitted, wheat will move rapidly to China or else China will have to face a WTO dispute panel and prove why it is excluding Washington state wheat," O'Rourke said.

Washington state's processed food industry also should have great opportunities in China, he said.

"One of the real problems in China is that it doesn't have modern food storage technology," he said.

"The opportunity for our financial sector to invest there means that foreign investors will help dramatically speed up the modernization of China. That could be good news for about 250 food processors here, including our juice industry and potato products."

The United States currently exports less than $1 billion in agricultural products to China annually, mostly through unofficial channels in Hong Kong to avoid tariffs, O'Rourke said. China also imports U.S. wheat, corn or soybeans when they are short of grain.

China has not allowed Washington pears to be imported there, said Chris Schlect, president of the Yakima-based Washington Horticulture Council.

"One of our hopes is that, if they agree to work under the framework of the World Trade Organization, our pears, apples and cherries could go in there," Schlect said.

"But we also must recognize China as an immense competitor. They grow a great many apples and other fruit there, and we must make sure they operate within the requirements of the WTO."

Steve Lutz, president of the Washington Apple Commission in Wenatchee, said Washington growers already send about 2 million boxes of their apples to China annually through Hong Kong, "but we could send more if they knocked down their tariffs."

China imposes a tariff of 30 percent on Washington apples, he said. When other taxes are added, the cost of a Washington apple can be expensive for Chinese consumers.

"With that agreement with China, those duties likely will come down," Lutz said.

Bill Stafford, executive director of the Trade Development Alliance of Greater Seattle, said his organization has long had plans for a trade mission to leave March 17 for China.

"China is a big market for this region," Stafford said.

"Anything that creates additional economic activity will have direct effect on their economy and ours. A country of 1.2 billion people should be part of the fabric of economic trade. Given the size of China, they have to be at the table."

P-I reporter Arthur C. Gorlick can be reached at 206-448-8306 or arthurgorlick@seattle-pi.com

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