The newly elected president was ready to make good on his campaign threats to take on China. Hadn’t he told big crowds that Beijing exploited U.S. goodwill? Hadn’t Chinese leaders played the prior occupant of the White House for a fool? While the new commander in chief lacked foreign policy experience and appointed aides who were as ready to fight with each other as with China, that shouldn’t pose a problem, he figured.
If there was one thing that Bill Clinton had in abundance, it was self-confidence. To his critics, that came across as arrogance or even narcissism.
There is much to learn from President Clinton’s experience battling with Beijing. While Clinton is now seen as the great globalizer—the man who paved the way for China’s full membership in the global trading system—he didn’t enter office that way. In 1992, he ran as a populist looking to revive U.S. manufacturing. He threatened to bash Japan with tariffs and to oppose the North American Free Trade Agreement unless it was rewritten, an early tryout for themes Donald Trump would use effectively twenty-four years later. President Clinton’s turn to globalization reflected pressure from business interests and a search for ways to ensure U.S. economic growth and influence, along with heavy doses of idealism and naïveté.
Back then, China was too poor and too backward to worry many as an economic challenger, aside from the clothing, electronics, and luggage makers trying to compete with importers who jumped from one low-wage nation to another. Clinton’s beef with China was about human rights. Three years after Chinese troops fired on student protestors in Tiananmen Square in June 1989, Bill Clinton said he would not “coddle tyrants from Baghdad to Beijing,” unlike his election opponent, President George H. W. Bush, a onetime U.S. ambassador to China. Clinton’s campaign went further, attacking “the butchers of Beijing,” a phrase that became identified with Clinton, though there is little evidence that he used the term.
Clinton wanted to turn his focus on Chinese repression into American policy. But his party was split between business-friendly lawmakers who wanted U.S. firms to cash in on the Chinese market, and China critics appalled at Beijing’s repressiveness. The split was illustrated vividly to him during the first weeks of his administration. California Representative Nancy Pelosi, a rising star who made China’s human rights a top priority, pressed him on the issue during a White House meeting. The next day Louisiana Senator Bennett Johnston stopped by to make sure Clinton would help energy and chemical companies expand in China.
The president recruited a venerable China expert, Winston Lord, to oversee China affairs at the State Department and work out a human rights policy. As a young Nixon White House aide, Lord accompanied Henry Kissinger on his secret trip to China in 1971, and rose in Republican ranks to become President Ronald Reagan’s ambassador to China. Feisty and patrician, Lord left China shortly before Chinese soldiers opened fire in Tiananmen Square, an event that turned him into a sharp critic of Chinese repression. Even more important for the Clinton White House, Lord had broken with his onetime allies in the Bush White House when they rushed to repair ties with Beijing. The new administration could count on his loyalty.
In December 1989, about six months after Tiananmen, newspapers reported that Bush’s national security advisor, Brent Scowcroft, flew to Beijing to warn that Congress was planning new sanctions. TV and newspaper photos of Scowcroft clinking wineglasses with China’s foreign minister at a state dinner were especially galling to Lord. The Bush White House had “forfeited moral reproof to seek improved bilateral ties,” Lord wrote in the Washington Post a few days after news of the Scowcroft visit surfaced. 1He later found out that Scowcroft had visited China even earlier, in September. “This was sort of the last straw for my growing impatience with the Bush Administration’s posture on China,” Lord told a State Department historian in 1998.2
A few months after Clinton took office in 1993, Lord cut a deal with Representative Pelosi and Senate Majority Leader George Mitchell of Maine, who represented the Democratic Party–controlled Congress. No longer would Washington give China the trade preferences it needed to export to the United States unless Beijing made sweeping changes in the way it treated dissidents. Under a May 1993 executive order, China was required to allow free emigration, bar exports made by prison labor, and show “overall, significant progress” in other areas, including releasing political prisoners, protecting Tibetan religious freedom, and ceasing the jamming of Voice of America. To Lord, the conditions would give the United States a cudgel to prod Beijing to make changes.
“I was a great hero for negotiating this,” says Lord now. “There wasn’t a lot of moaning.”
That may have been true among China’s critics, but that was hardly the case among U.S. businesses—or members of the Clinton economic team.
Since Tiananmen, Congress had voted every year whether to end trade preferences, known as Most Favored Nation (MFN) status, which guaranteed Chinese imports the lowest possible tariff rate. Without MFN, Chinese goods would have been priced out of the U.S. market and Beijing’s economic growth stymied. During the Bush administration, MFN approval was routine. U.S. multinational businesses teamed with the White House to lobby Congress for MFN renewal.
Now that certainty evaporated. If Beijing didn’t meet the tough human rights criteria by the summer of 1994, trade with China could halt.
These days, U.S. business relations with Beijing are fraught. China is seen as a crucial market for investment and exports, but feared for its ability to pressure companies into handing over technology, or stealing it. In the early 1990s, there was no ambivalence. Big U.S. firms were all-in for China, whose potential seemed limitless. “The Chinese government came to rely on us as an ally,” says a former business executive who helped put together a coalition to boost China trade. “Early on, they had no idea how effective we could be.”
Eleven days after Bill Clinton was elected president, the National Association of Manufacturers, the nation’s largest manufacturing trade association, wrote the Clinton transition team to make the case that granting China MFN status was essential to the revival of U.S. competitiveness, which candidate Clinton had promised. Without the trade preferences, businesses “cannot afford to make the investments that would be necessary to take advantage of market opportunities in China,” NAM’s president wrote.
Later, as Lord was negotiating with Congress, NAM followed up, arguing against making human rights improvement a condition for trade with China. A new business group, the Business Coalition for U.S.-China Trade—an umbrella trade group made up of trade associations focused on China—sent the president a letter signed by 334 companies and trade associations that opposed additional requirements for MFN approval. “The persistent threat of MFN withdrawal does little more than create an unstable and excessively risky environment for U.S. companies considering trade and investment in China, and leaves China’s booming economy to our competitors,” the coalition charged. By the time the president made his decision on MFN in May 1994, the number of companies and trade groups signing a similar petition topped eight hundred.
At the center of the business lobbying was Boeing Company, the nation’s largest exporter, which viewed the China market as a do-or-die proposition. Boeing had established a China office in 1980, as the country looked to modernize its air fleet, and helped Beijing improve its deplorable air safety record by training air traffic controllers and helping install modern safety systems. That paid off as Boeing became the leading aircraft supplier to the burgeoning economy.
Should Beijing freeze out Boeing because of unhappiness with the Clinton administration and shift its orders to Boeing’s European competitor, Airbus SE, Boeing would lose the manufacturing scale necessary to compete globally. Boeing pressed its vast network of suppliers to lobby their local lawmakers and organized other big companies to do the same. Within the Clinton administration, Boeing reminded cabinet members, especially Commerce Secretary Ron Brown, that tens of thousands of jobs depended on keeping China happy and airplane orders flowing.
“The Boeing Company’s access to foreign markets, including the rapidly growing China market, is essential to our efforts to remain globally competitive and to provide good, high-paying jobs for U.S. workers,” Boeing declared in a set of talking points it used in lobbying sessions. “Today approximately $5 billion in Boeing aircraft sales are at risk if MFN status to China is conditioned” on improvement in human rights.
As the decision to extend MFN in 1994 drew close, Boeing paid for a television ad featuring Democratic party luminary Robert Strauss, who had been chairman of the Democratic National Committee and then U.S. trade representative. “The simple truth is that pursuing U.S. commercial interests with China is fully compatible with the achievement of long-term U.S. human rights objectives,” Strauss said. Boeing also made sure to keep party leaders in Beijing up to date on its lobbying activities.
“Boeing worked to strengthen commercial relations, including pressing MFN extension, de-linkage of trade and human rights, and ultimately commercial normalization,” says Lisa Barry, Boeing’s former vice president of trade policy, who helped plot strategy for the business coalition.
Other companies in the top tier of lobbyists included automaker General Motors Company and insurer American International Group (AIG), which became leaders in the China market. Boeing’s relationship with Chinese leaders was so close, says Barry, that Liu Huaqiu, a Chinese vice foreign minister who handled U.S. relations, would say of air transportation: “If it’s not Boeing, I’m not going.”
Business groups had plenty of allies within the Clinton administration, whose top priority was to lift the nation out of an economic funk. (“It’s the economy, stupid,” wasn’t just a Clinton campaign catchphrase; it reflected the new administration’s priority.) Although the recession that had doomed President Bush’s reelection campaign officially ended in March 1991, the rebound was tepid and the unemployment rate hovered near 7 percent in 1993. Commerce Secretary Brown, senior White House economic aide Bowman Cutter, and others complained that Lord had cut them out of the discussions with Congress over the MFN conditions, a charge to which Lord now pleads guilty.
But Lord still resents what he calls the efforts of economic officials to “sabotage” the administration’s pressure campaign through leaks to the press and complaints to the president. At a meeting in October 1993, for instance, Deputy U.S. Trade Representative Charlene Barshefsky and her counterparts at Commerce and Treasury stayed afterward to complain that Lord was putting too much emphasis on human rights at the expense of trade and economics. Cutter, the White House aide, took those complaints to National Security Advisor Sandy Berger, who was sympathetic to arguments about the economy. 3
One White House official joked to a Wall Street Journal reporter that while many Americans go to China to buy shirts, U.S. Secretary of State Warren Christopher—Lord’s boss—went there to lose his.4 Brown, meanwhile, was putting together a trip to China with two dozen chief executives, timed to arrive in the summer of 1994, shortly after the president had to decide on whether to extend MFN.
China scholar Michael Pillsbury writes in The Hundred-Year Marathon, a book that highlights the influence in China of anti–United States hard-liners, that Beijing put together a secret plan to bolster ties between Clinton economic officials and China’s allies among U.S. businesses. They called it “the Clinton coup,” 5Pillsbury says. If the Chinese did so, they wasted their time and money; the Clinton officials needed no convincing.
“President Clinton, to his detriment, didn’t rein in those economic agencies,” Lord told the State Department historian in a transcript that tops eight hundred pages. “He refused to knock heads as he should have done in ensuring that his own policies were carried out. Therefore, we had splits in our position, which the Chinese could see and which totally undercut our leverage.”
“The Chinese could say to themselves, ‘Well, the White House is not policing its own agencies,’” Lord continued. “‘All of the economic types in the American administration are unhappy. The business community is lobbying the administration. They’re unhappy.’ So why should China make concessions?”6
Mack McLarty, President Clinton’s chief of staff at the time, dismisses Lord’s claim of sabotage. “We worked hard to have really serious and engaged and candid conversations at the White House and cabinet levels,” he says. “At some point, the president had to make a decision about where the proper balance should be struck.” 7
* * *
In Beijing, party leaders showed no signs of caving to U.S. demands. When President Clinton met for the first time with Chinese President and Communist Party chief Jiang Zemin during an Asia-Pacific conference in Seattle in November 1993, the meeting went poorly. Jiang stuck to his briefing books, despite Clinton’s best efforts to charm him. When the president asked Jiang about economic reform, figuring that was a good icebreaker, he “was then treated to about a 45-minute monologue in which Jiang Zemin cited statistics,” says Lord in the oral history. The two leaders made no headway on human rights, either.8
In late February 1994, John Shattuck, the State Department’s top human rights official, flew to Beijing to check on progress, ahead of Secretary of State Christopher. As a warning shot, the State Department released its annual report on China’s human rights record shortly before Shattuck arrived. Beijing “fell short of internationally accepted norms,” the report found. In Beijing, Shattuck agreed to meet with one of China’s most prominent dissidents, Wei Jingsheng, who had been in and out of jail for years for advocating democratic change.
Wei picked the lobby of Beijing’s opulent China World Hotel, a meeting place that could hardly be missed by Chinese security agents. Afterward, Wei held a press briefing where he urged President Clinton to hang tough on human rights, once again tweaking his jailers. Some Chinese dissidents sought publicity, figuring that an international reputation gave them some protection at home from harassment. Wei was picked up by security agents after the session, but then released before Christopher was due to land in Beijing. To guard against a repeat performance, Wei was forced to leave Beijing while other dissidents were arrested, hardly a sign that China was taking Clinton’s demands seriously.9
Relations only worsened when Christopher was ushered into the Great Hall of the People to discuss human rights and other issues. There he met with Chinese Premier Li Peng, a hard-liner who had supported the Tiananmen Square crackdown and who was known for his sarcasm and opposition to opening China to Western business.
Li, a protégé of Zhou Enlai, a revered Chinese revolutionary who advocated building diplomatic ties with America, represented the conservative wing of the party. His political pedigree and years running a state-owned Beijing power company made him one of the most effective defenders of party control during his time.
The Chinese premier turned his meeting with Christopher into a harangue. How dare Washington interfere with China’s internal security issues in the name of human rights, he lectured the secretary of state. Why should he take Clinton’s threats seriously? If Washington were to revoke MFN, “the U.S. would lose its share of the big China market,” he told Christopher. U.S. executives had already let him know they were pressing the administration to change its policies, including those from General Electric, AT&T, and “Gold Sacks,” an apparent reference to the Wall Street firm of Goldman Sachs. 10
Li made it clear that “China will never accept the U.S.’s human rights concept,” says a former Chinese diplomat. Years later, Christopher recalled the Li talks as “one of the most difficult meetings I ever had. He basically dared us, ‘Go ahead and deny us MFN and then we’ll see who they say lost China.’” 11
Deflated, the State Department team jetted home and felt they were slapped once more in the face, this time by Clinton. The president didn’t publicly object to the way his team was manhandled in Beijing or make a statement defending the administration’s human rights policy. “He let us hang there in the wind,” says Lord now. Not so, argues his former chief of staff, McLarty, who says the president “was thinking how to engage the Chinese privately, compared to publicly.”12
Back home, President Clinton convened a series of White House meetings where he asked national security and economic officials for ideas on how to deal with China. Pressure on human rights clearly wasn’t working. Cutting off U.S. companies from the fastest-growing economy in the world was also a nonstarter. Aside from economics, the United States needed China’s help on nuclear proliferation, the global environment, and other important issues. Turning China into an enemy made no sense. The former Soviet Union and its onetime Warsaw Pact allies seemed to be liberalizing; China could be the next Communist country to change.
A decision on MFN renewal was due in May, two months after the Christopher trip fiasco. The Commerce Department ran computer simulations of the impact of targeting exports only from Chinese military-owned industries. 13 The economic results were insignificant. Another idea: slash imports from mainland China but spare those involving Hong Kong and Taiwan. That proved to be impractical, given the large role investors from those regions played in Chinese manufacturing. Trade sanctions would also damage U.S. firms that owned factories in China and prompt retaliation from Beijing.
“We are constantly reminded by our Chinese partners that the annual fear of MFN renewal withdrawal raises serious questions about the credibility of our commitment to China,” AT&T’s China chief told Christopher at a session with U.S. business officials in Beijing following his Li Peng meeting. To make sure that message was heard widely, the U.S. executives voted to open their meeting with Christopher to the press.14
Finding no good alternative, Clinton canceled his policy. MFN approval would no longer be linked to Chinese progress on human rights. In an Oval Office meeting in May, he explained his rationale to senior officials, citing the examples of Cuba and Russia.
“The Chinese threw out the Soviets when the Soviets were their only friends in the world,” he said, according to the recollection of several attendees. “That’s interesting. And we’ve been trying to change human rights in Cuba, just ninety miles away, in a place with a similar culture to ours, and we have gotten nowhere. That’s interesting, too. Now with China, with 1.2 billion people halfway around the world, we’re going to dictate to them? We have no leverage.”
President Clinton learned other hard lessons too that continue to apply to China. It’s tough, if not impossible, to get China to make changes that it views as opposed to its national interests, especially ones that might weaken the Communist Party’s hold on power. In Clinton’s time, Beijing feared the democratic change sought by dissidents, seeing what had happened in the former Soviet Union. These days it worries that the Trump administration’s demands that China remake its economy could weaken the party’s economic control.
It’s also hard to convince Beijing that the United States is fully committed to change when the president’s top advisers are feuding over China policy and the U.S. business community is staunchly supporting Beijing. Those same issues will come into play later in the book as President Trump moves to confront China.
Late in the afternoon of May 26, 1994, President Clinton stepped to the podium of the White House briefing room to formally delink human rights from trade. In a tone that struck some reporters there as defensive and almost apologetic, he said that China had failed to achieve “overall significant progress” in human rights, as his policy required. But even so, he would recommend continuing China’s trade preference. His goal wasn’t to isolate China by cutting off trade, he said, but rather “to engage the Chinese with not only economic contacts but with cultural, educational, and other contacts, and with a continuing aggressive effort in human rights”—a position that business groups had been advocating for months, and which became U.S. policy for every succeeding administration until Donald Trump took office.
Clinton said he would push American companies to adopt a code of conduct for doing business in China, an effort that quickly fizzled. He invited CEOs to meet him in the White House Cabinet Room and lectured them that the administration wasn’t giving up on human rights in China, a cause they should champion, too. “If you don’t understand that, shame on you,” he told them.
Businesses focused instead on their China expansion plans. Kentucky Fried Chicken, then a subsidiary of PepsiCo Inc., said it would spend $200 million to establish fast-food restaurants in forty-five Chinese cities by 1998. After the delinking decision, “the door to China is open wider,” KFC’s president told the Wall Street Journal. 15
PepsiCo spun off KFC in 1997. Today the chicken restaurants are part of Yum China Holdings Inc., China’s largest restaurant company, which is incorporated in the United States but run out of Shanghai. Yum operates 5,900 KFC restaurants across 1,200 Chinese cities.