China Trade Odyssey Offers Rewards, Risks

Webb to open office in nation at odds with U.S.

On the surface, Beijing and Washington spar over destroyer
sales to Taiwan, missile defense and human rights.

But behind the scenes, U.S. business and local governments,
including Denver’s, conduct taxpayer-funded courtships of China,
forging closer and deeper relations than ever before.

This week, when Denver Mayor Wellington Webb departs for
China with 47 executives, scholars and city officials, he’ll push
the courtship to a new level by opening the first U.S. city office
in China.

Webb lined up a carpeted, bedroom-size sixth-floor office in
central Shanghai to serve as a conduit for business and pro-Denver
buzz. Connecting with China’s 1.3 billion people will propel
Denver “ahead of the curve,” Webb said in an interview, promising
local economic growth and “a relationship that will last long
after I am mayor.”

The City Council approved $160,000 for the China project, and
the eight-day trade mission is expected to cost another $36,000.
Shanghai-based trade representative Roland Tong’s salary will be
$84,000 to serve city interests across China.

An office-opening ceremony is set for Thursday with
Shanghai’s mayor.

Then, after swings through China’s ancient capital of Xi’an
and Beijing, Webb hopes to meet with Chinese Premier Zhu Rongji.
Webb and Colorado Gov. Bill Owens hosted Zhu in Denver two years
ago. Zhu oversees China’s economy and access by foreign companies.

Corporate executives accompanying Webb want to win
construction contracts in China, line up direct flights to Denver,
supply television programs and help China land the 2008 Olympics.

But they’re pursuing their interests as a high-level drama
between Washington and Beijing tilts U.S.-Chinese cooperation
toward competition. President Bush soon must decide whether to
defy Chinese President Jiang Zemin by selling four high-tech
destroyers to Taiwan. A Chinese diplomat last week warned of a
very serious setback if the sales go through. Diplomats also
dicker over Pentagon plans for missile defense, and evidence that
China recently aided Iraq. A new U.S.-backed United Nations
resolution would condemn China for human rights abuses – just as
Beijing seeks the Olympics.

Yet state and city ties to China and elsewhere deepen as
mainstream America connects with the global economy.

Over the past 30 years, states established at least 132 trade
offices worldwide, according to state records. Governors and
mayors also lead more trade missions and typically support
international sister-city links. In contrast, U.S. federal
government representation abroad, with 257 posts, stayed
relatively steady through the 1990s.

Relations with China in particular are growing. China
supplies U.S. families with affordable toys, shoes, clothing and
other merchandise worth $100 billion a year. In China, 15 states
run mainland or Hong Kong offices.

Among cities, Houston, too, is considering an office in China.

“If China is our strategic competitor,” Webb said, “one of
the ways to address that is to find areas where we agree, and
where we disagree. … It’s better to trade and tie your economies
together than have military buildups.”

Possible drawbacks

But even proponents see risks.

A risk that China won’t open up. China agreed to lower
tariffs as a condition for its expected entry into the World Trade
Organization this year. Currently, Colorado-based ConAgra Inc.
faces 40 percent tariffs to sell beef in China. In Fort Morgan,
sunflower seed entrepreneur Mike Erker, whose sales to China
topped $1.5 million last year, pays 32 percent tariffs that he
suspects back-channel seed sellers from Taiwan avoid.

A risk that strife between between Beijing and Washington
could stifle business. Englewood-based Jeppesen-Sanderson, which
makes navigational charts for airlines, can’t obtain coordinates
for some Chinese runways because Chinese military officials
object, chief executive Horst Bergmann said. “The political
climate is important for the business climate,” Bergmann said. “If
Washington would open up, I think China would possibly be more

A risk that even if China does cut tariffs and bureaucracy,
companies from Colorado still won’t be able to compete. U.S. trade
with China is increasingly imbalanced in favor of China. The
United States recently posted a record $83.8 billion deficit.

In the Rocky Mountain region, imports from China topped $883
million last year, up from $32 million in 1990, according to U.S.
customs data analyzed for The Denver Post by federal trade
specialists. The region includes Colorado and parts of Wyoming,
Idaho, Utah and Montana. The specialists said state-by-state
import statistics aren’t available but that the bulk of the
regional imports probably went to Colorado.

Meanwhile, exports of Colorado goods and services to China
were valued at just $164 million, up from $41 million in 1996.

Mainland China ranks 14th among Colorado trading partners. If
exports to mainland China are combined with the $233 million to
Hong Kong and $196 million to Taiwan, the “Chinese Economic
Region” looks more promising. Colorado’s top trade partner is
Canada, which bought goods and services worth more than $1 billion
last year, followed by Japan.

Human rights concerns

Beyond the risks, critics question whether cities and states
should deal with China, a communist dictatorship, on principle.

“China has the most repressive government on the planet,”
said Denver Councilman Ed Thomas, who tried unsuccessfully to
block public funding for Webb’s venture. “I don’t think we should
be over there shaking their hand.”

Thomas lambasted Webb for courting China when Webb previously
led city efforts to boycott South Africa under apartheid.

“People are setting themselves on fire in Tiananmen Square.
How much more odious do you want to get?” Thomas said. “You can’t
justifiably shut the door on South Africa and then offer an olive
branch to the government in China, where people are setting
themselves on fire in demonstrations.”

Chinese dissident Harry Wu, an author and lobbyist in
Washington, D.C., contends China’s treatment of political
dissidents, religious believers and labor activists is worsening.
Denver taxpayers “have to stop courtship like this,” Wu said.
“This is using the common people’s money for business, business
associated with a communist government. Why do you want to set up
all kinds of relations with this regime? You never wanted to do
this with the former Soviet Union because it was the “Evil
Empire,’ right?”

At least Webb should “strongly raise concerns,” said Jie Sun,
a Chinese immigrant in Denver devoted to the Falun Gong spiritual
movement, which China’s government has banned.

“To sacrifice human rights for a good trading relationship is
to sacrifice the American value of freedom of belief.”

In Washington, conservatives press for a harder line on
China. U.S. Rep. Tom Tancredo, R-Littleton – a House International
Affairs committee member who opposed granting China permanent
normalized trade relations last year – denounced Webb’s overtures
as “ridiculous, naive at best. This will only increase our trade
imbalance with China, not improve it. There will be these little
sops they throw. We’ll get a contract here, a contract there.”

Yet Webb is adamant. He says human rights in China is a
serious issue but that economic engagement will increase U.S.
leverage and improve human rights and labor conditions.

Cheap labor beckons

And China with its 1.3 billion people – many of them willing
to work for 20 cents an hour – entices. More Colorado
businesspeople attend programs on China than on any other country,
said Jim Reis, chief of the Denver-based World Trade Center and an
architect of Denver’s trade mission.

For them to profit from China, veteran U.S. diplomats say,
support from political leaders helps.

Politician-led trade missions “have reasonable paybacks”
though generally nothing immediate, said Craig Johnstone, a
retired U.S. ambassador now serving as president of the U.S.
Chamber of Commerce Center for Corporate Citizenship.

“Very few are boondoggles,” he said. “It’s a shame more
public officials don’t do more of this.”

Most of the 30 or so businesspeople accompanying Webb already
have connections in China. They represent large companies such as
CH2M Hill, the Gates Corporation, Harza Engineering and RNL
Design, and a few smaller firms such as Chi Investments and Revis

Few see Webb’s help and a trade office as crucial.

“We probably don’t need it as much as maybe some other
companies,” said Jim Nelson, vice president and general counsel
for Gates.

But Nelson and others said Webb, if effective, could boost
Colorado business by opening doors. In China, government approval
is required for just about everything, and building relationships
with ministry officials is seen as crucial. Often there’s no
occasion to do that without politicians and pomp – supported by

Going to China with Webb will give “access to people and
resources that you would not have going alone,” said Michael
Burke, vice president for Startek, a supply chain management
company with offices in Denver, Greeley and Grand Junction.

Some executives also hoped to get a better feel for the human
rights climate in China. It’s not a matter of questioning
government policies but rather understanding project-level
procedures such as how Chinese partners would treat contract

“If we can’t agree on certain principles, it would be
impossible for us to work,” said Dean Nelson, vice president of
Mortenson Construction, a top U.S. contractor that built Denver’s
Pepsi Center and Coors Field and is exploring opportunities in

“From the humanitarian side, I think there are issues
everybody has trouble with,” Nelson said. “How are we going to
control safety for these people? … We simply couldn’t accept a
project or work under conditions where we would put people at risk.”

The businesspeople met with city officials last week – a
session city officials closed to reporters.

They also received guidance from Hai Yan Zhang, an
interpreter and cultural consultant who grew up in Beijing. She
said she always dreamed of building bridges between Colorado and

Her advice to Webb and crew: Avoid the impatience, arrogance
and ignorance that often plague Americans in China. And pay
attention to image. Denver’s sixth-floor office in central
Shanghai – adjacent to a Ritz Carlton hotel in an
internationalized district with a Starbucks Coffee outlet – sends
the appropriate signal. A basement office would give “no face, no
status,” she said.

“In China, who you are and what you are doesn’t matter. It’s
what people think.”