THE PRESIDENT: Thank you very much. Please be seated. First ofall, welcome back to Washington. I'm delighted to see you. Ialways enjoy meeting with this group. I think a lot of you knowthat at least -- I've identified at least three errant members ofmy administration who have been associated with YPO -- ErskineBowles, Mack McLarty, and Phil Lader. There may be more, and ifthere are, they'd probably like to be back with you instead ofover here with me.
(Laughter.)

I will try to be succinct about what I want to say. I know thatthe Treasury Secretary and others are coming on in a few momentsto talk about the details of our budget agreement and some ofthe other issues that are cooking around here in Washington today.But I'd like to use this opportunity to make an officialannouncement about China. And let me just sort of set the stageby saying I think that our country has three huge questions thatwe are in the process of answering as we move into a new centuryand a very different time.

One is, how are we going to preserve a structure of opportunityfor the next generation to keep the country going and growing?The second is, what kind of society are we going to be? Is thiscountry going to work as a whole? Can we deal with problems ofcrime and welfare and the intergenerational responsibilities asthe baby boom generation retires? And can we learn to livein what is rapidly becoming the world's most rapidly multiracialmultireligious, multiethnic democracy? There are four schooldistricts in America now where the children come from more than 100 different ethnic groups in one school district.

And the third great question is, are we prepared to do what ittakes to see the United States continue to be the world'sleading force for peace and freedom and prosperity? Because,ironically, at the end of the Cold War, because we are not intwo armed camps in the world, all of our economic and militarystrength can only be brought to bear if we're willing to becomemore interdependent with the rest of the world and recognize ourlinkages.

In some ways, the decision that we have to make every year aboutChina reflects elements of all three of those great questions --our prosperity, the kind of society we are, and how we're goingto deal with the rest of the world. The United States has ahuge stake in the continued emergence of China in a way that isopen economically and stable politically. Of course, we hope itwill come to respect human rights more and the rule of law more,and that China will work with us to secure an international orderthat is lawful and decent.

I have decided, as all my predecessors have since 1980, to extendMost Favored Nation status to China for the coming year. EveryRepublican and Democratic President since 1980 has made the same decision. This simply means that we extend to China thesame normal trade treatment that virtually every other country onEarth receives from the United States. We believe it's the bestway to integrate China further into the family of nations, and tosecure our interests and our ideals.

But as we have had controversies and differences with China overthe years, this decision itself has become more controversial,because there are those in both parties in the Congress who believe that if we hold our trade relationship hostage to Chinabecause of our differences on human rights, our weaponstechnology, or the future of Hong Kong, we will have moreinfluence since we buy about 30 percent of China's exportsevery year -- sometimes we buy even more.

But I believe if we were to revoke normal trade status it wouldcut off our contact with the Chinese people and undermine ourinfluence with the Chinese government. This is a big issuethis year because, as many of you know, under the agreementsigned more than a decade ago between Great Britain and China,Hong Kong is reverting to China shortly.

I think it's interesting that Hong Kong, which has the world'smost open trading system, has vociferously argued to the UnitedStates that we should extend Most Favored Nation status.Even those people in Hong Kong that have been most passionatelyidentified with the cause of freedom and human rights and havebeen most in conflict with the Chinese have argued that wehave to maintain an open trading relationship with them so thatwe can continue to work with them. I might also say that if wewere to revoke their normal trading status it would close one ofthe world's most rapidly growing, emerging markets, one thatalready supports 170,000 American jobs and doubtless will supportmore in the years ahead.

So our broad policy is engagement. That doesn't mean that we winevery point, but it means we work together when we can and we'rehonest in our disagreements when they exist. For example -- and Ithink it's important to point this out -- we actually worktogether with China quite a lot. We worked with them to extendthe Nonproliferation Treaty indefinitely. That means that we'vegot over 170 countries in the world that say they will never developany kind of capacity to proliferate nuclear weapons around theworld in other countries, and they agreed to be tested for it.

We worked with China to get a historic accord on the comprehensiveban of nuclear testing. We worked with them to freeze NorthKorea's nuclear weapons program, which, when I became Presidentfour years and four months ago, I was told was the most immediatemajor security concern of the nation at the time. We work themnow to advance the possibilities that there will actually be alasting peace on the Korean Peninsula, which is the last frontierof the Cold War.

We also work with them on drug-trafficking, terrorism, aliensmuggling, environmental decay. And when we don't agree with them,we have found ways to say so without cutting off all of ourcontacts. We pressed them to stop assistance to unsafeguardednuclear facilities in other countries. We insisted that theyprotect the intellectual property rights of American videotapeand compact disc makers. That's a huge economic issue forAmerica. And so far China has done what they said they would doin closing down its facilities that were essentially stealingmoney and jobs from America's businesses. That's still an ongoingproblem; it will continue to be one, as it has been in everyemerging country a long way from the United States that can copythings that we do here. But we have certainly fought to reducethe problem.

We also took action to show our displeasure with provocativemilitary actions in the Taiwan Straits last year, and we stood upfor human rights at the Human Rights Commission meeting of the United Nations.

So we have ways to deal with our differences. There are thosewho believe that our differences are so profound they would --we would get our way more, if you will, or our position would bemore likely to prevail, if we cut off all trade contact. Ibelieve that is wrong. And we're going to have a big debateabout it in the Congress. But today, in front of you, Ithought I would make this formal announcement that I do intendto extend Most Favored Nation status. The way it works under thelaw is, now Congress has a chance to try to undo this, and wewill have a big debate in the Congress. While you're here, ifyou have an opinion on it, I hope you'll express it to yoursenator or member of Congress.

(end excerpts)