Thomas Lee Boam: AIR COLLISION COULD HURT TRADE VOTE

Date: 04-05-2001

HONOLULU -- The top U.S. commerce official in Beijing called the timing of the U.S.-China air collision "extremely unfortunate" because of the impact it could have on Congress if China trade comes to a vote this June.

"It's naive to think there will be no impact beyond military and political if this is allowed to go on," said Thomas Lee Boam, minister counselor for commercial affairs at the U.S. Embassy in Beijing. Boam spoke at the East-West Center yesterday.

If the two countries do not finalize an agreement on China's accession into the World Trade Organization by June, Congress must again vote on whether to grant China permanent normal trade relations.

Boam emphasized that it's essential to keep strong business, family and educational ties between the United States and China. "These give stability to our long-term relationship. They expand as buffers when these kinds of things (air collision) occur."

U.S.-China trade totals $100 billion – 7 percent of China's Gross Domestic Product (GDP), Boam said. China is the 4th largest trade partner of the United States, where 20 percent of all Chinese exports go. Exports to Wal-Mart stores alone total 1 percent of China's GDP. "Wal-Mart prices would skyrocket" if trade between the two countries was disrupted, he said.

Boam described vast business potential in China –- the number of cell phones there will exceed those in the United States, with only 6 percent of potential users so far tapped. But he also advised investors to move cautiously. Reform of state-owned enterprises is slow, unemployment is high, and the banking system is in trouble. Piracy continues to be a problem, especially in pharmaceuticals but also in areas such as testing services required for entry into foreign universities.

Boam said "infatuation with China" has caused businesses to fail. Overly eager investors may lack solid business plans and overlook due diligence.

China's entry into WTO, however, will lead to significantly lower tariffs, greater transparency and better rule of law.