The United States has renewed Most Favored Nation—now known as Normal Trade Relations—status for the People’s Republic of China for another year.
For the past several years, the American Congress has held heated debate on the decision to extend MFN, a status which ensures low tariffs on imported goods, to China. Hoping to influence Chinese policy, members of Congress have used the annual MFN renewal to pressure Chinese leaders on various issues not directly related to trade. China’s human rights records, policies regarding Tibet, and its stand on weapons proliferation have thus consistently been linked to the continuance of trade rights. Furthermore, the growing American trade deficit with China has alarmed many legislators and influenced the debate.
This year, the vote to renew MFN came as China-related scandals rocked Washington—allegations of illegal Chinese campaign contributions to the Democratic party and the transfer of sensitive satellite technology with possible military uses to Beijing.
President Clinton, continuing his policy of “constructive engagement” with China, in early May announced that he was extending MFN status to the mainland for another year. To block the extension, majorities in both the House of Representatives and the Senate had to oppose it within ninety days.
In late June, shortly before the House debate, Congress voted to change the designation of “Most-Favored-Nation” to “Normal Trade Relations” (NTR). Supporters of the change argued that the term MFN suggests China is receiving favored status and confuses the issue of renewal and insisted that “Normal Trade Relations” more accurately reflects reality because only a handful of nations are denied the status. The bill was signed into law by the president.
The House Ways and Means Committee endorsed Clinton’s decision to grant an extension of MFN and House Speaker Newt Gingrich also announced that he would support the renewal. Furthermore, the full House debate occurred in the wake of President Clinton’s high-profile China summit with Chinese President Jiang Zemin.
Nevertheless, debate in Congress was again heated. Critics of the renewal focused mainly on the trade imbalance, although human rights and other related issues were also hotly discussed. Business groups lobbied heavily to extend Normal Trade Relations for China, arguing that if normal trade ties were severed with China the U.S. economy would be damaged and the cost to American consumers would be high. U.S. Trade Representative General Counsel Susan Esserman told the House Ways and Means Committee that revoking China’s MFN status would increase the cost of items imported from China and hurt billions of dollars of American exports to China and Hong Kong. The probable losses to American farm income were also cited. Finally, many argued that stable U.S.-China commercial relations will serve to promote democracy in China and that good relations with the world’s most populous nation are necessary to lend stability to a region rocked by economic crisis.
Ultimately the House backed the president’s recommendation by a 264-166 majority vote, a slight increase over last year’s 259-173 vote. After the House vote, the president said that it “reflects my conviction that active engagement with China, expanding our areas of cooperation while dealing forth-rightly with our differences, is the most effective way to advance our interests and our values."
Recently the efficacy of an annual extension has been questioned. Clinton told the Los Angeles Times that he favored giving permanent MFN status to China and abolishing the requirement that the U.S. Congress approve the status every year. Chinese leaders have also argued for a more permanent solution to the problem of NTR renewal.
In addition, Connecticut Senator Joseph Lieberman, chairman of the Democratic Leadership Council, referred to the annual debate as a “rhetorical whipping post for whatever ails U.S.-China relations” and called for its end. During the debate, Representative Robert Matsui (D-California) commented, “It is foolish to even think we can isolate China.” Finally, during his recent visit Clinton urged Chinese leaders to lower trade barriers, telling them that “We cannot build support for permanent MFN for China in the Congress on the basis of anything less.”