THE CLINTON ADMINISTRATION, finally and completely converted from candidate Clinton's 1992 attacks on President Bush's China policy, now subscribes religiously to the notion that commercial engagement with the People's Republic of China will leaven the militaristic impulses of nascent hard- liners and ipso facto lead to political liberalization and rectification of human rights abuses. As Robert Kagan has rightly pointed out in these pages, this naive view exhibits an almost Marxian economic determinism.
But there is an even more fundamental flaw in the thinking behind the " engagement" approach. It is premised on the notion that there is a "free- market communism" with which we can engage. There is no such thing. Communist China is not a free market and shows no signs of becoming one.
Chinese individuals (let alone foreign nationals) are not free to interact on their own in the economic sphere, so a handful of large multinational corporations preponderates in the Chinese "market." Just as in the former Soviet Union -- where even under Brezhnev firms such as Pepsico and International Harvester followed Armand Hammer's example and profired -- it requires the approval of party functionaries to undertake business transactions.
Just when the Communist government will deign to grant its approval, and when it will not, is inherently unknowable because there is no enforceable positive law in China. Often the most important rules are the unpublished ones -- a fact that creates all-too-tempting opportunities for the official corruption that pervades China's "market" economy.
Transparency International, a non-profit watchdog organization, recently rated China the fifth most corrupt nation in the world (behind Nigeria, Pakistan, Kenya, and Bangladesh). Freedom House's latest World Survey of Economic Freedom reports that Communist officials "detained or seized passports of foreigners to exert pressure in commercial disputes" and that " kidnappings and other forms of violence" are used to settle debts and enforce contracts.
It is in the area of contracts that we can truly see the heart of the problem. Contract disputes are governed by a hodgepodge of at least five overlapping and inconsistent authorities. An even larger difficulty is the Communist government's frequent preference for relationships (guanxi) and personal empathy (ganqing) in place of the actual terms of contracts. This anti-legal atmosphere has, in a host of instances, reduced what should be binding commercial arrangements to nothing more than a starting point for further negotiations.
This extends to international agreements as well. After China's initial economic liberalization in the late 1970s, there followed a wave of abrupt, unilateral cancellations of contracts with foreign concerns. Similar cycles of boom-and-bust contract signings and cancellations have followed regularly. The Communist government's record of enforcing foreign arbitration awards is abysmal. Chinese courts regularly refuse to honor them despite the PRC's accession ten years ago to the New York Convention on Foreign Arbitral Awards.
Similarly, both domestic commerce and international trade are impeded by the arbitrariness and secrecy of Chinese "law." According to a 1996 Clinton administration report, despite Communist China's 1992 commitment to publish all laws and regulations affecting imports, a large number of directives remain unpublished.
Nor does the Chinese government consider international agreements to be binding. Charlene Barshefsky, then the acting U.S. trade representative, was forced in June 1996 to negotiate an intellectual-property understanding with the PRC identical to one signed in March 1995.
Freedom of choice in occupation for Chinese citizens is severely limited. Within the state-owned sector of the economy, which employs two-thirds of the working population in urban areas, there is no occupational choice whatsoever. In non-state enterprises, the government regulates access to employment by refusing to grant residency permits (and social and health services) to the hundreds of millions of Chinese who float into urban areas in search of any alternative to working for the state. While the Communist party boasts of making its high-handed decisions about people's lives on the basis of labor " market" prices, its treatment of human beings as state-owned chattel marks one of the key aspects of classic socialist central planning.
Freedom of commercial speech does not exist in China. The Communist regime is working hard not only to censor the PRC's version of the Internet, but also to restrict the availability of financial information and news of commercial affairs even among business journalists. The New York Times reported in February 1996 the promulgation of regulations steering the flow of electronic information through monitoring "ports" controlled by the PRC's Ministry of Posts and Telecommunications. In April 1996, the official news agency, Xinhua, announced that no foreign news agency could publish economic information in China without prior government examination and approval.
Nor can an economy that employs so much slave labor be considered a free market. Some 6 to 8 million people are currently captive in the notorious Laogai slave labor camps. According to the latest official statistics, the Laogai operates 140 export enterprises, selling to over 70 nations abroad. Slave labor is responsible for producing many key commodities, including graphite, rubber, and asbestos. One-third of Chinese tea is grown by Laogai prisoners.
Private rights of ownership in real estate are negligible. The result, in combination with state-run enterprises, has been predictable: A recent study by the congressional Joint Economic Committee, China's Economic Future, found that state subsidies have dangerously depressed farm prices, shielded unprofitable enterprises from competition, and limited production of food for China's destitute population. Private ownership of land, meanwhile, is simply forbidden in units larger than so-called Township Village Enterprises.
Compounding the lack of market norms in China is the extensive influence of party-controlled businesses that do more than compete with private firms. The children and relatives of top party cadres -- known as "princelings" to Sinologists -- have routinely been appointed to run the "businesses" created under Deng Xiaoping's order in the last two decades.
One notorious princeling is He Ping, Deng's son-in-law, the president of the Poly Group -- an enormous conglomerate run by the People's Liberation Army that is engaged in arms sales as well as commercial enterprises. Through Poly and similar firms, Deng has found a "free market" means of subsidizing the Communist Chinese armed forces, now allied with Iran and Syria. But the damage these "market" activities inflict extends further: Last year, He Ping's company was indicted in San Francisco for smuggling thousands of AK- 47s to California street gangs and offering for sale machine guns, mortars, and shoulder-fired missiles that could "take out a 747," in the words of one Poly agent.
In the teeth of such overpowering evidence that the Communist Chinese economy is anything but a free market, many -- and not just apologists in the Clinton administration -- argue that its economic progress is miraculous. If China still has a Communist economy, they insist, then how has it managed to double its GNP in a decade?
Well, just how significant is that, in fact? It sounds impressive only because of the base of impoverishment against which it is measured. Even at its current level, Communist China's per capita GNP in dollars ranks below such emblems of Third World poverty as Lesotho, the Congo, Senegal, Bolivia, Guatemala, and Honduras.
Nor should China be judged by a different standard because of some inherent strain in the Chinese national culture. The Chinese who live across the strait on Taiwan have a thriving free-enterprise economy with a per capita GNP over 20 times that of the Communist mainland. It is a sobering and sad fact that the PRC purchases far less from the United States than does tiny Taiwan, despite the fact that the Communist giant has over 50 times its population.
A few glib observers have characterized China's economy as "market Stalinism." This is half right. Communist China's economic order is indeed Stalinist. Just as Stalin's Gulag added massive slave labor to a centrally planned, state-controlled system and relied extensively on Communist- controlled "enterprises," China's Communists in the late 20th century continue to burden their economy with a repressive statism only slightly ameliorated by the heavily publicized Special Economic Zones.
None of this means that American influence cannot work to change things for the better. But instead of encouraging progress, the Clinton administration's passive China policy has coincided with the Communist government's alarming moves against civil and economic liberties, against dissidents like Wei Jingsheng, and against Hong Kong.
The trend is away from, not toward, the rule of law in China. This year's State Department human rights report offers a grim assessment: "All public dissent against the party and government was effectively silenced by intimidation, exile, the imposition of prison terms, administrative detention, or house arrest. No dissidents were known to be active at year's end."
The antidote to Communist corruption, slave labor, and denial of commercial freedoms in China is free enterprise, and U.S. policy toward China must be premised on promoting it. Our most significant lever to accomplish this is not most-favored-nation status, but China's pending application to enter the World Trade Organization.
If China wants WTO membership, it must first meet the organization's standards: minimal central planning, private ownership, free-trade policies, and the determination of economic decisions according to comparative advantage.
But instead of insisting on these requisites, the Clinton administration is ploughing on with negotiations to bring China into the WTO now, as is -- the world's largest Communist country. Charlene Barshefsky observed on January 29 that in WTO accession talks, "China's offers thus far have been largely inadequate." But by naming China soft-liner Lee Sands as chief negotiator with China on its admission to the WTO, the Clinton State Department has signaled Beijing that America won't press hard for economic, political, or human rights reforms.
Last spring, President Clinton's assistant secretary of state for East Asian and Pacific affairs, Winston Lord, paid a visit to my Capitol Hill office. I asked him why the State Department and our president could not say clearly that we hope China will rid itself of communism. He told me he agreed, of course: It would be better if China were not Communist. But we just can't say so publicly, he added knowingly. Thus, with a silence as eloquent as President Reagan's international appeals for freedom that helped topple the Soviet Empire, the Clinton administration made clear it was forswearing a policy of anti-communism.
The Clinton policy ostensibly supports free trade. But in fact it will have the opposite effect. Not until the demise of communism and the advent of genuine free enterprise in China will we truly witness the kind of vibrant trade between our two countries that we, the Chinese, and the world deserve.
Christopher Cox, a Republican from the 47th District of California, is chairman of the House Republican Policy Committee.