Statement for the Record
Sandra J. Kristoff
Senior Vice President
New York Life International, Inc.
Before the House Committee on International Relations
Subcommittee on Asia and the Pacific and
Subcommittee on International Economic Policy and Trade
April 21, 1999

Mr. Chairman and Members of the Committee:

My name is Sandra Kristoff, and I am Senior Vice President for
International Government Affairs of New York Life International, Inc.,
an indirect, wholly-owned subsidiary and the international business
arm of New York Life Insurance Company. New York Life is one of the
nation's largest insurance companies -- a Fortune 100 company with
assets under management in 1998 of $122.6 billion and operations in
all 50 states and overseas through a network of 12,000 employees and
10,000 agents. New York Life International has overseas business
operations in Argentina, Mexico, Indonesia, Korea, Taiwan, Hong Kong
and representative offices in China. To date, the company has over
$156 million in foreign sales and has created 4,600 jobs in these

We are committed to strengthening New York Life's presence in the
international marketplace and believe U.S. leadership on international
trade is essential to achieving our goal. It is for this reason that I
am honored to be here today to discuss our observations of Premier Zhu
Rongji's recent visit and our assessment of China's WTO offer.

The Role of the Services Sector

First, I would like to offer a brief review of the role of services
industries in the U.S. economy.

In 1997-98, the U.S. services sector represented three-quarters of
U.S. national economic output and employed 80 percent of the U.S.
workforce. In 1998, the services sector created 2.9 million net new
jobs. On the international trade scene, services exports in 1998
constituted nearly 30 percent of all U.S. exports, totaling $260.3
billion and achieving a trade surplus of almost $80 billion. To
understand the astonishing growth of the services sector, one only has
to consider that in 1985 the services export surplus was $300 million.
The services sector export surplus for 2001 is projected to be $105

The expansion of trade in services has been a powerful engine of
growth for the global economy. Trade in services now represents more
than 20 percent of the world's cross border trade, or more than $2
trillion; services account for at least 60 percent, or some $210
billion, of annual flows of direct foreign investment.

The Importance of China

New York Life and other leaders in the business community fully
recognize this is a critical time in our relations with China. The
public policy debate surrounding Premier Zhu's visit to the United
States has raised legitimate questions about Chinese intentions and
how the United States should interact with the world's most populous
nation. Some voices are suggesting that these concerns are reason not
to proceed with China's WTO accession. We at New York Life believe
these issues should be resolved on their own merits, in their own

The arena for economic and commercial issues is the WTO. The WTO is
the foundation of an open, rules-based international trading system,
and membership is a privilege not a right. WTO membership requires a
country to meet standards of market openness and agree to apply WTO
rules, including the rules of dispute settlement, which provide a
credible and effective tool to enforce U.S. rights, backed up by the
threat of WTO-authorized sanctions for non-compliance. There is no
question that WTO accession is American's best tool for opening
China's market. It is a vast improvement over our current trade
destabilizing approach to gaining market access in China -- an
approach that relies on piecemeal, bilateral agreements and the threat
of unilateral sanctions. It permanently locks China into an open,
transparent, non-discriminatory trade regime enforced by dispute
settlement procedures.

Reducing the trade deficit and guaranteeing China lives up to its
agreements does not require us to punish China by keeping it outside
of the system of global trade rules. As the largest emerging economy
in the world, China's integration into the rules-based international
trading system is essential to ensuring that it undertakes the
obligations and responsibilities of the trading system from which it
benefits. It is in the U.S. strategic interest to anchor China in the
WTO legal framework, which will create new incentives and pressures
for China to undertake economic and regulatory reforms and abide by
international trade rules.

New York Life also maintains that if China and the United States
conclude an acceptable accession agreement, we will firmly support the
extension of permanent Normal Trade Relations (NTR) status to China.
NTR status is not a favor for China. It simply provides to China the
same treatment the United States offers virtually all of its trading
partners. More importantly, the United States will not receive the
full benefits of China's WTO market access commitments until it takes
this step. WTO accession requires the reciprocal extension of
permanent NTR by the United States and China, and with that
reciprocity we can end the need for the divisive an annual debate in
Congress on NTR renewal.

Over the past several years, a broad range of American business
interests encouraged the Administration and the Chinese to reach a
commercially acceptable WTO accession agreement as soon as possible.
The expansion of U.S.-China trade is vital to America's continued and
future economic prosperity. Over the past decade, U.S. exports to
China have increased over 20-fold. It is conservatively estimated that
those exports to China support more than 200,000 export-related U.S.
jobs, as well as tens of thousands of jobs in U.S. retail,
transportation, entertainment, financial, telecommunications,
marketing, consumer goods and services firms.

China's WTO accession is particularly important to us at New York Life
because we have made international market expansion one of the keys to
our company's future. Since 1845, life insurance has been New York
Life's vital product. It is a product that fulfills a unique social
responsibility and New York Life possesses a unique competency and
leadership in life insurance. Since the insurance markets of the more
developed economies have matured, New York Life needs to find other
avenues to grow in order to support our financial strength well into
the next century.

China's demographics of 1.2 billion people, with 26 percent under age
14 and 68 percent ages 15 to 64, make it the world's prime market for
the financial security of life insurance, annuities and pensions.
Currently only 30 percent of the Chinese population has any type of
life insurance. And while the 1997 per capita GDP was $3,460, the
annual savings rate has averaged over 40 percent. Currently 13 Chinese
firms and nine foreign insurance companies offer products in China;
this does not include the four firms approved to apply for licenses on
April 6, 1999.

I am sorry to say New York Life and approximately 20 other American
insurance companies are not currently allowed access to the Chinese
market. But even our competitors operating in China do so under severe
restrictions. They can pursue business in only two cities -- Shanghai
and Guangzhou. They are limited to minority ownership, are restricted
with whom they can joint venture and are constrained in the scope of
the products they can offer.

The Recent WTO Negotiations

New York Life, like most observers of the China WTO accession process,
was discouraged last year when it appeared Beijing was reluctant to
make the hard decisions necessary to complete the negotiations. We had
hoped the momentum in bilateral relations sparked by the exchange of
state visits in October 1997 and June 1998 would create the necessary
impetus for concluding the decade-long negotiations. But we also had
always maintained that China should not be allowed into, or be kept
out of, the WTO solely on political considerations.

To ensure the Administration understood our position, the insurance
industry developed a priority agenda for the USTR to pursue. We
developed this agenda working with the American Council of Life
Insurance, the U.S. Chamber of Commerce, the U.S.-China Business
Council, the Emergency Committee for American Trade (ECAT), the
Coalition of Service Industries and the U.S. Committee of the Pacific
Basin Economic Council (PBEC-US).

By working with organizations representing a broader coalition of
American trade interests with China, New York Life is confident the
insurance industry's objectives were consistent with the principles of
full market access, national treatment and transparency and with the
scope of concessions and levels of WTO discipline being sought by
other industries. We believed our objectives would enable us to be
competitive in China and allow our potential Chinese policyholders to
enjoy the full benefits of our insurance products. We also believed
and made clear to the Administration and the Chinese that an agreement
satisfying one industry, but failing to address the issues of other
core industries, such as agriculture or telecommunications, would not
win broad support. Finally, we insisted the negotiations yield
immediate real benefits on market access to all sectors of the U.S.

Ambassador Barshefsky and her lead negotiator, Robert Cassidy, have
secured Chinese commitments that, pending WTO accession, will address
the great majority of our industry's market access objectives. For

-- China will award licenses on the basis of prudential criteria and
there will be no economic needs testing before licenses are granted.

-- All geographic limitations will be removed no later than January 1,
2005, with 12 cities opening no later than January 1, 2002 and 12
additional cities opening no later than January 1, 2003. Several
cities of particular interest to American firms are included in the
2002 and 2003 liberalization commitments.

-- Over five years, China will open group, health and pension lines of
insurance to American firms.

-- Life insurers may have 51% joint venture ownership no later than
January 1, 2001 and non-life insurers may have 100% ownership no later
than January 1, 2002.

-- Joint venture partners will no longer be narrowly restricted to
Chinese insurance companies. Foreign firms will be able to select
their own joint venture partners.

-- All restrictions on insurance brokerage will be removed no later
than January 1, 2005.

This agreement represents an historic breakthrough for the U.S.
insurance industry in China. Did we get everything we wanted as
quickly as we wanted it? No. But the nature of negotiations is
predicated on compromise and this agreement is truly a "win-win."
American insurance firms will have the opportunity to enter the
Chinese market and to compete. Chinese consumers will benefit from
this competition and from the wide range of new products and services
which we will offer. Even the Chinese insurance firms, which have
enjoyed the protection of the current restrictions on foreign firms,
will benefit from the professionalism and innovations we will bring to
the Chinese marketplace.

Finally, through its market opening commitments, China is sending a
strong signal to foreign investors that it is moving toward the rule
of law in trade matters. China's current WTO offer eliminates an array
of Chinese barriers and creates new opportunities for American
business, farmers and workers. China's offer is a comprehensive market
opening agreement on agriculture, sanitary and phytosanitary barriers,
industrial products and services. China has agreed to a series of bold
steps including significant and permanent tariff cuts, elimination of
most import quotas, application of national treatment, extension of
trade and distribution rights, greater access for information
technology and telecommunications firms, and resolution of
longstanding agricultural disputes over meat, citrus and wheat.

But we face one problem. The incredible progress achieved by USTR
cannot start to be translated into market access for American exports
unless and until the U.S. bilateral agreement is completed and the
remaining negotiations on China's accession are finalized. Over the
past several weeks, New York Life has communicated with the
Administration and the Congress its clear position that we should
press to wrap up the talks on the bilateral market access package as
quickly as possible so the concessions gained from China are not lost,
the momentum of the negotiating process is not lost, and the Chinese
agreement to play by the rules is not lost.

New York Life, in particular, is working with members of Congress to
increase understanding of the benefits that would accrue to the U.S.
economy from an agreement that is implemented. We look forward to
working with members, including those of this committee, to develop a
broad bipartisan coalition in support of China's WTO accession and
extension of permanent NTR status.


New York Life acknowledges that serious issues are being raised about
the legitimacy of U.S. policy toward China and China's readiness to
contribute to stability bilaterally, regionally and globally. But as
noted above, we believe these issues should be resolved on their own
merits, in their own arenas and that it is a false choice to suggest
our relations with China are a zero-sum game.

The choices facing the United States and China are complex and
nuanced, not the "black and white" suggested by some. Promoting
American values does not require us to cut off interaction with China.
Indeed moving China toward internationally accepted standards of
conduct is more likely to be achieved if China is exposed to Western
values, ideas and commerce. Such exposure will strengthen further the
economic and political forces that are changing Chinese society.

No matter how stridently some may suggest that American business is
seeking profits at the expense of other important American interests,
New York Life believes it would be a mistake to turn back the clock on
the twenty-five years of improvements in U.S.-China relations. Major
gains have been made on security, trade, nonproliferation and human
rights issues because of the engagement policy pursued by all
Administrations since 1973 with bipartisan congressional support.

The WTO understanding announced two weeks ago is the culmination of 12
years of hard work and constant pressure. It is not a "political deal"
or a gift to China. The concessions are all China's -- a fact perhaps
not yet fully understood. China will earn its place at the table in
Geneva the "old-fashioned way," by providing genuine access to its
market and committing to accept the rules and standards of the
international trade regime.

It is true the remarkable progress of the past four weeks was sparked
by the action-forcing event of the scheduled visit of Premier Zhu.
This is not surprising since the clock and the calendar each can help
focus the vital issues and the real priorities. In fact, the intensity
of the past month's negotiations and related breakthroughs are
comparable to the increased activity and legislative agreements that
occur at the conclusion of a session of Congress.

There seems little doubt that if we do not conclude the bilateral
agreement, prospects for China's WTO membership will fade for several
years. The next global trade talks, set to be launched in Seattle next
December, would take place without the benefit of China's
participation and China would remain outside the system of trade rules
for an indefinite period of time. Finally, we urge members to
recognize that even with China's market access offer in place,
America's firms and workers will not reap fully the benefits of the
agreement unless we extend permanent NTR treatment to China.

Thank you.