Wednesday, September 20, 2000

Effects of China trade bill will take time to get here

The Cincinnati Enquirer

        Tuesday's vote to give China permanent access to U.S. markets will initially benefit Tristate companies already doing business there, local observers say.

        “I don't know that there's going to be some instantaneous surge of business from our corner of the country to China,” said Michael Oestreicher, an international lawyer for Thomson Hine & Flory in Cincinnati.

        “I think it may be more politically important than immediately important economically.”

        Among his clients already doing business in China, he said, “I don't know of any who've been waiting for passage of this bill to do something” beyond their existing business.

        But for companies looking to expand internationally, the publicity of the trade bill puts China on their radar screens, Mr. Oestreicher said. “Companies that haven't done anything will turn their attention to it,” he said.

        Perhaps the biggest immediate Tristate beneficiary of the trade bill could be General Electric Aircraft Engines, because of its association with Boeing.

        The trade bill's passage could allow Boeing to sell 40 to 60 planes — mostly 737s, which are exclusively powered by CFM, GEAE's joint venture with Snecma of France — to China, as Asian air travel rebounds following the region's economic recovery.

        “I see Boeing as a primary beneficiary of China's entry to the WTO,” said Heidi Wood, an analyst at Morgan Stanley Dean Witter & Co. in New York.

        China has 20 different airlines; GE and CFM already provide engines to 17 of those carriers.

        Half of CFM's engines are assembled at GEAE's Evendale plant. The other half are built in Villaroche, France.

        Under the trade bill, manufacturing companies will win distribution rights as well as cuts in tariffs. And that could have a strong effect on Procter & Gamble Co., long an advocate of normalized trade with China.

        P&G, which already has 4,500 employees in 11 joint ventures, recently bought out its partner in a detergent venture. P&G had been partners with Beijing No. 2 Factory in producing Panda detergent. P&G gave the Panda brand back to its partner, and will concentrate on producing Tide and Ariel detergent there.

        Under the trade bill, Tristate firms could eventually benefit from China's being a large importer of agricultural goods and the country's need to spend heavily on infrastructure, according to the Ohio Alliance for International Trade.

        Finally, multinational corporations, attracted by low labor costs and proximity to Asian markets, will soon be able to take advantage of China's agreement to allow 50 percent foreign ownership of companies and direct competition in its markets.

        “It means, probably, a leap of direct foreign investment in China,” said Lyuba Zarsky, co-founder of the Nautilus Institute for Security and Sustainable Development in Berkeley, Calif.

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