PERSPECTIVE ON TRADE : Heading the Wrong Way on China : A U.S. proposal to target state-owned enterprises would hurt the human-rights cause and social-rights gains.

The Clinton Administration has concluded rightly that the cost to America of adhering to its announced human-rights policy toward China is too high. However, there is now a danger that the Administration will try to save face by adopting measures that spare China’s American trading partners but intensify the previous policy’s perverse effects within China.

Categorically denying most-favored-nation trade status to China as a means of inducing human-rights reform was a bad idea. Selectively imposing trade sanctions on state-owned enterprises--the position to which most sanction proponents have retreated--is a worse one.

The problem is that America’s human-rights policies focus on the political rights that are threatened by a powerful state, while ignoring the social rights that depend on an effective state. A strategy to punish China by undermining its sources of public revenue would be much more likely to undermine social rights than to strengthen political rights.

America tends to evaluate China’s human-rights performance on a very narrow range of values--preeminently, political speech and secondarily, freedom of organization and humane treatment of prisoners. We have rightly rejected the argument of Chinese leaders that such values are a Western imposition alien to their culture. Even putting aside the general defects of such “cultural relativism,” liberal and humanitarian values have strong bases in Chinese culture and widespread domestic support.

But Chinese leaders fault America more plausibly for ignoring other areas of human rights no less important to the freedom and welfare of their people in which China’s relative performance has been good. Because of achievements in health, nutrition and housing, life expectancy in China is years longer and infant mortality is about half the rate of such countries as India and Brazil. And the educational system has achieved high rates of literacy.

Chinese leaders are bewildered by America’s obsession with their treatment of prison labor (which for the most part differs little from comparable practices here), when America seems so indifferent to the abuse of free labor through horrendous working conditions in countries such as Mexico whose MFN status has been unquestioned.

Ironically, China’s considerable achievements in social rights are now threatened by the very developments that sanctions proponents applaud. The process of economic liberalization has produced dramatic benefits, but it has also left the state in a fiscal crisis that impairs its ability to maintain the social safety net. What was once a model system of health care is in disarray. Access to education has become more difficult for many. Inflation has priced the majority out of the housing market in some areas.

Perhaps most disturbing, sweatshop working conditions are proliferating, especially in the coastal provinces where foreign investment has been zealously courted. The reports of worker mistreatment in the new capitalist enterprises rival the ugliest stories of prison labor abuse and include unhealthy conditions, long hours, humiliating discipline and even beatings.

Nearly 200 workers died in three recent factory fires in the coastal areas. In one reminiscent of the notorious Triangle Shirtwaist fire in New York in 1911, workers were trapped by doors the employer had locked to prevent them from taking unauthorized breaks. Laws regarding minimum wages, health and safety and union organizing rights are widely unenforced. At the end of 1992, only 1% of foreign enterprises complied with Chinese laws requiring that workers have a union to represent them.

The failures to maintain the social safety net and to enforce workers’ right to humane treatment are both related to the fiscal weakness of the state. The loosening of control over the economy, and particularly the state enterprises, has deprived the government of a large portion of the revenues on which it previously relied and has made it dependent on foreign investors, including those who will not accept public regulation of its employment practices.

In these circumstances, the currently proposed sanctions targeted on state enterprises seem perverse. They would favor private enterprises without regard to their standards of worker treatment. If successful, they would hurt public enterprises (which at least in the rural industrial sector include some of the most dynamic and innovative firms in the economy), and they would worsen the fiscal crisis.

The recent agonies of Russia ought to remind us that a weak state can be as dangerous to human rights as a strong state. Paralyzed by fiscal crisis and political stalemate, the Russian government is unable to provide basic police protection of personal security, much less of economic and social welfare. Since selective sanctions amount to an indiscriminate attack on all the activities of the Chinese state, they are not a sound way to advance human rights.