Most-Favored-Nation Status of the People's Republic of China

Updated June 10, 1998

Vladimir N. Pregelj Economics Division, CRS

The Tiananmen Square massacre of June 4, 1989, and the repressive policies and violations of human rights by the Chinese government that followed it, led to the imposition by the United States of some economic and other sanctions against China and to consideration of additional sanctions, among them the withdrawal of China's most-favored-nation (MFN), or nondiscriminatory, status in trade with the United States. After having been suspended in 1951, MFN status was restored to China in 1980 conditionally under Title IV (including the Jackson-Vanik freedom-of-emigration amendment) of the Trade Act of 1974 and must be renewed annually. The lapse or withdrawal of the MFN status would result principally in the imposition of substantially higher U.S. customs duties on, and in higher costs of, over 95% of U.S. imports from China ($51,289 million in all in 1996) and a likely cutback in such imports as well as possible retaliatory reduction by China of its imports from the United States. A significant economic disadvantage may likely result for Hong Kong, which remains a separate economic entity.

Sundry legislation introduced in earlier Congresses to withdraw or severely restrict China's MFN status failed to be enacted, in two instances for failure to override the Presi-dent's veto. In mid-1993, the President set additional human rights conditions for the renewal of China's MFN status in mid-1994, but this policy was reversed in 1994, by delinking the MFN renewal from human rights and other conditions except the freedom-of-emigration requirement, triggering new legislative measures to restrict China's MFN status, none of which was enacted.

In the 105th Congress, legislation has been introduced to grant permanent MFN status to China outright, or upon its accession to the World Trade Organization. Some of the latter-type bills would place certain additional conditions on the grant of the MFN status.

A bill would deny MFN treatment to products or exports of the Chinese Army or a Chinese military company; another would raise the amount of U.S. tariffs on imports from China's to the level of China's tariffs on U.S. exports to China.

On January 30, 1998, the President extended the trade agreement with China for 3 years, and on June 3, 1998, renewed China's Jackson-Vanik waiver. Legislation to disapprove the renewal has been introduced in the House.

MOST RECENT DEVELOPMENTS

Various legislation either enhancing or restricting China's MFN situation is pending in the 105th Congress. Such legislation would: grant permanent MFN status to China either unconditionally, or upon its accession to the World Trade Organization; require prior congressional approval of U.S. support of China's WTO membership and the withdrawal of the United States from the WTO if China is admitted without U.S. support; deny MFN treatment to products or exports of the Chinese Army or a Chinese military company; increase the amount of U.S. tariffs on imports from China to that of China's tariffs on U.S. exports to China; or, under certain conditions, provide for a snapback of U.S. tariffs to pre-Uruguay round levels.

Legislation to disapprove the mid-1997 extension of China's Jackson-Vanik waiver was defeated, allowing the extension of MFN status through July 2, 1998. On January 30, 1998, the President, by a presidential determination renewed for 3 years the trade agreement with China, and on June 3, 1998, renewed China's waiver. Legislation to disapprove the renewal was introduced in the Houses on June 4, 1998 (H.J.Res. 120).

 

 

BACKGROUND AND ANALYSIS

China's MFN Status

The United States has applied most-favored-nation (MFN) treatment in trade as a matter of statutory policy, enacted in 1934, generally to all of its trading partners. This policy was modified with the enactment of section 5 of the Trade Agreements Extension Act of 1951 (P.L. 82-50), which required the President to suspend MFN status of the Soviet Union and all countries of the then Sino-Soviet bloc. Under this statutory mandate, President Truman suspended China's most-favored-nation status as of September 1, 1951. After China's occupation of Tibet, that country's MFN status was suspended as of July 14, 1952. MFN status could, since October 1962, be restored to any of the suspended countries only by specific law, until the Trade Act of 1974, in Title IV, provided special authority and set out the conditions and the procedure for its restoration to "nonmarket economy" (NME) countries and subsequent continuation in effect.

Under Title IV, the key elements of the procedure for restoring MFN status to an NME country are (1) conclusion of a bilateral trade agreement containing a reciprocal grant of the MFN status and additional provisions required by law, and approved by the enactment of a joint resolution; and (2) compliance with the freedom-of-emigration requirements ("Jackson-Vanik amendment"). These requirements can be fulfilled either by a Presidential determination that the country in question places no obstacles to free emigration of its citizens, or, under specified conditions, by a presidential waiver of full compliance.

In accordance with this procedure, the President, on October 23, 1979, transmitted to Congress the trade agreement with China, signed on July 7, 1979, its proclamation (Pres. Proc. 4697; 44 F.R. 61161), and the executive order (E.O. 12167; 44 F.R. 61167) granting to China the Jackson-Vanik waiver (H.Doc. 96-209). The agreement was approved by Congress on January 24, 1980 (H.Con.Res. 204, 96th Congress) and entered into force (together with the reciprocal grant of the MFN status, which it contains in addition to all other provisions required by section 405(b) of the Trade Act of 1974) on February 1, 1980.

The continuation in force of an NME country's (e.g., China's) MFN status is contingent on (1) triennial extensions of the underlying trade agreement and (2) continued compliance with the Jackson-Vanik amendment, in the case of some NME countries, including China, on annual renewal of the waiver authority and existing waivers.

The agreement, concluded for a 3-year initial term, itself provides for automatic 3-year extensions, but is subject to termination by either party upon notice at least 30 days before the expiration of any 3-year term. The continuation in force of the agreement is also subject to Section 405(b)(1)(B) of the Trade Act of 1974 (19 USC 2435(b)(1)(B)), which applies to any trade agreement concluded under Title IV with an NME. Under Section 405, the agreement is renewable if a satisfactory balance of concessions has been maintained during the life of the agreement and the President determines "that actual and foreseeable reductions in United States tariff and nontariff barriers ... resulting from multilateral negotiations [which indirectly benefit China because of its MFN status] are satisfactorily reciprocated by [China]." The agreement has thus far been renewed six times, most recently by Presidential Determination No. 98-14 of January 30, 1998 (63 F.R. 5857) through January 31, 2001.

To remain in force, the Jackson-Vanik overall waiver authority as well as China's waiver (and China's most-favored-nation status, which is contingent on it) must be renewed annually. The renewal procedure entails (1) a President's recommendation, made by June 3 of every year, that the waiver authority and individual waivers be extended for another 12-month period (through July 2 of the following year). The extension is (2) automatic unless it is disapproved by the enactment of a joint resolution.

The language of the resolution is prescribed by law, and a specific fast-track procedure is provided for its consideration. In its basic steps, the resolution must be reported within 30 calendar days (or else the committee considering it may be discharged), may be amended only with respect to the country (or countries) to which it applies, and the debate on it is limited in either chamber to 20 hours, divided equally between those favoring it and those opposing it. The resolution must be approved by August 31. Specific steps are provided in the event of a presidential veto. If the resolution is enacted, the waiver and the MFN status cease to be effective on the 61st day after its enactment.

Despite the increasing opposition in Congress -- particularly in recent years -- to the continuation in force of China's MFN status on various grounds, mostly unrelated to the freedom-of-emigration considerations, legislative action to disapprove its annual extensions has been unsuccessful and China's waiver and MFN status have remained in force.

Withdrawing or Restricting China's MFN Status

MFN status can be withdrawn from China in several ways: (1) by appropriate direct legislation enacted through regular legislative process; (2) by using the specific means provided in the Trade Act of 1974 for denying MFN status to a NME country that had it restored under that law, i.e., by the fast-track enactment of a joint resolution disapproving the mid-year annual renewal of the Jackson-Vanik waiver authority with respect to China, if such renewal is recommended by the President, (3) by the President's failure to recommend such renewal with respect to China in the first place, for noncompliance with the Jackson-Vanik requirements; or (4) by direct action by the President suspending or withdrawing China's MFN status. China also can lose its MFN status if the agreement is terminated, upon notice, at the end of a term, or, presumably, if the 3-year extension of the U.S.-China trade agreement does not take place because the President declines to make the required determination. (See also p. 2.)

As an alternative to a withdrawal or suspension, restrictions of various severity or scope can be applied to China's MFN status by specific legislation enacted under the regular procedure.

In past years, the Congress has often attempted to terminate or restrict China's MFN status by means of joint resolutions disapproving the annual extension of China's waiver or by specific legislation, or subject its continuation in force to additional statutory conditions, primarily in the area of human rights. None of these measures has become law, although two of them (one in either session of the 102nd Congress), setting additional conditions for the annual extensions of MFN status, came close to being enacted: passed by both Houses, they were vetoed by the President and the veto was upheld by the Senate.

A special situation arose in mid-1993, when the President extended China's waiver for another year, but at the same time in Executive Order 12850 also set specific additional conditions for the mid-1994 extension of China's waiver and MFN status. These conditions closely reflected those set in the several versions of the United States-China Act of 1993 and, in addition to compliance with the Jackson-Vanik amendment, required: mandatory compliance with the 1992 U.S.-China prison labor agreement, and significant progress with respect to China's adherence to the Universal Declaration of Human Rights, releasing and accounting for Chinese citizens imprisoned or detained for the nonviolent expression of political and religious beliefs, ensuring humane treatment of prisoners by allowing access to prisons by international humanitarian and human rights organizations, protecting Tibet's religious and cultural heritage, and permitting international radio and TV broadcasts into China. The E.O. also charged U.S. officials to pursue resolutely actions to ensure that China keeps its commitments to follow fair, nondiscriminatory trade practices in dealing with U.S. businesses, and adheres to the Nuclear Non-Proliferation Treaty, the Missile Technology Control Regime guidelines, and other nonproliferation commitments.

While China denounced the action taken by the President, the principal sponsors in both Houses of the legislation to subject the 1994 extension of China's MFN status to additional conditions (Representative Pelosi and Senator Mitchell) expressed their satisfaction with the President's action as representing a sufficient step, and stated that further congressional action on their respective bills would be unnecessary. The linking of China's MFN status to overall human rights, however, was abandoned in mid-1994 when President Clinton renewed the China waiver taking into account only its statutory condition, namely, compliance with the freedom-of-emigration requirement of the Jackson-Vanik amendment. Subsequent legislative measures to disapprove the renewal or subject it again to broad human rights conditions failed.

In both sessions of the 104th Congress, the joint resolutions disapproving the presidential extensions of China's MFN status through the renewals of the Jackson-Vanik waiver failed of passage. Likewise, no action was taken on several other bills, such as one nullifying China's waiver and subjecting its restoration to enactment by regular procedure; or another, conditioning the continuation of China's waiver on Taiwan's speedy admission to the WTO; or one assessing additional tariffs on imports from China until the President determines that China is fully implementing the agreement on the protection of American intellectual property rights in China.

Denial of China's MFN status, in whichever manner brought about, would have to be implemented also with having regard of two relevant provisions of the U.S.-China trade agreement, addressing specifically the discontinuance of the agreement or of any of its provisions. In its automatic 3-year extension provision (Article X.2), the agreement allows for its termination if either party to it "notifies the other of its intent to terminate this Agreement at least thirty (30) days before the end of a term." The agreement also provides (in Article X.3) that "if either Contracting Party does not have domestic legal authority to carry out its obligations under this Agreement, either Contracting Party may suspend application of this Agreement, or, with the agreement of the other Contracting Party, any part of this Agreement." This provision appears to be applicable with respect to MFN treatment in the event that the waiver authority is withdrawn under the Jackson-Vanik amendment.

In addition, a more generally applicable provision (Article IX), which asserts "the right of either Contracting Party to take any action for the protection of its security interests," might conceivably, if circumstances would warrant, be used to suspend the MFN treatment.

An additional element to be considered in the context of U.S. MFN policy toward China is China's present candidacy for and eventual membership in the World Trade Organization (WTO) and the obligation of WTO members (which include the United States) to accord to each other unconditional MFN treatment. This obligation is contained in Article I of the General Agreement on Tariffs and Trade 1994 (GATT 1994), one of the many compacts resulting from the Uruguay Round of multilateral trade negotiations that constitute the Agreement Establishing the World Trade Organization.

If China acceded to the WTO -- a goal China as well as the major WTO members are earnestly pursuing -- the present U.S. MFN policy, which conditions China's MFN treatment by the United States on the requirements of Title IV, or -- even more drastically -- a complete withdrawal of MFN status from China, would technically violate the U.S. obligations under GATT Article I. To avoid such violation, the United States could -- and most likely would, if necessary -- take recourse to WTO Article XIII, which provides for nonapplication of all WTO multilateral agreements between two members if, at the time either becomes a member, either does not consent to such application. If the United States and China then wished to apply reciprocally any other provisions of the WTO package of agreements (except the MFN treatment), they could do so by amending the existing bilateral agreement or renegotiating it by including provisions for such application.

Reasons for and Effects of Withdrawing China's MFN Status

In the context of the Jackson-Vanik amendment and Title IV procedure, the sole criterion for continuing in force or withdrawing China's MFN status is China's compliance with the freedom-of-emigration requirements--a criterion which in present circumstances no longer represents a practical obstacle to China's MFN status. The advocates of denying MFN status to China, however, have gone beyond the narrow scope of the freedom-of-emigration issue and have based their opposition to continued MFN status on China's violation of human rights in general, its unfair trade practices and obstacles to market access, lack of legal and regulatory transparency, large and growing U.S. trade deficit with China, China's uncooperative attitude in weapons and nuclear nonproliferation, and, more recently, the allegedly illegal Chinese donations to the Democratic National Committee.

Supporters of MFN treatment of China, among them the Administration, have taken the position that the resolution of these issues ought to be pursued through consultations and negotiations, or other appropriate means. Particularly the structural trade and economic issues involved, they suggest, would best be resolved in the ongoing negotiations for China's accession to the World Trade Organization. In the view of the supporters of China's MFN status, its withdrawal would be counterproductive since it would increase friction and be less conducive to resolution of any problems through dialogue. It would, they assert, particularly in the human rights area, possibly exacerbate the situation, in addition to the adverse economic consequences it would engender.

Economic consequences would be considerable. Withdrawal of China's MFN status would result, in the first instance, in significant duty increases on about 95% of U.S. imports from China. The cost effect of the increases would vary among the various product groups, but would on the whole be substantial.

The following table illustrates how the withdrawal of the MFN status would affect the duty rates assessable in 1997 on 15 major products or product groups imported from China in 1996 (listed in descending order of magnitude), totaling $13.4 billion and accounting for 26% of all imports from China in 1996.

Table 1. Illustrative MFN and Full Duty Rates Applicable in 1997 to Major Imports from China

 

In view of the overall substantial differences between the concessional (MFN) and full rates of duty, it is clear that the termination of China's MFN status would result in substantial increases in the cost of imports from China. The average MFN duty rate on all 1996 imports from China, dutiable as well as nondutiable, was 5.5%. Without MFN treatment, this rate would have been at the 45% level. An even larger gap between the MFN and full-duty treatment would occur in the top categories of U.S. imports from China, primarily because a substantial share of them are duty free under MFN treatment but would be subject to high duty rates without it. Based on our survey of imports under the 101 individual tariff items whose imports in 1996 exceeded $100 million each and which together accounted for $27.5 billion (53.8%) of all U.S. imports from China in that year, the termination of China's MFN status would increase the average duty rate on those imports from 4.8% to 44.4%. The importers' overall cost of those products would increase by over one-third, in most individual instances between 25% and 65%.

As a consequence of such increases, the trade pattern of articles now imported from China would be likely to change substantially. Much of their sourcing would be likely to shift to suppliers in other countries or to domestic suppliers. This restructuring also would result in higher costs to the importers of the articles involved, in part because the imports from China that would still take place would be subject to higher, non-MFN duties, and in part because the costs of articles from alternative sources would most likely be higher, although lower than they would be for non-MFN imports from China.

While some of the increases would likely be in part absorbed in the subsequent chain of distribution, relative cost increases at the retail level would be high particularly on low-margin moderately priced consumer goods (certain clothing, footwear, household electrical and electronic products, toys, etc.), of which China is now a substantial supplier, and some of which may even -- at least temporarily -- become priced out of the U.S. market. Because of the type of the articles involved, the resulting increased costs and reduced availability would affect disproportionately low-income U.S. consumers.

On the Chinese side, such changes would obviously reduce significantly the U.S. demand for such imports from China. The size of this reduction and its adverse effect on China's economy would depend on a number of factors, but, in the opinion of several China trade experts, would be substantial. It would be, it is claimed, particularly damaging to the economy of China's southern provinces (Fujian and Guangdong) which are most dependent on exports and where much of China's exports originate. Indirectly, it would also adversely affect Hong Kong and the economic benefits it derives from being the port of transit for about 70% of China's exports to the United States, and whose businessmen also have substantial manufacturing interests in the neighboring southern China: hence, Hong Kong's general opposition to the withdrawal of China's MFN status. Hong Kong's recent reversion to China's sovereignty as a Special Administrative Region has not changed Hong Kong's status as a separate trade and customs entity nor the role it has played in the past in China's foreign trade and other other economic relations. A withdrawal of China's MFN status would also have adverse consequences for other major investors in South China: Taiwan, Japan, and the United States.

Depending on whether and, if so, in what way and to what extent China would retaliate against imports from the United States (by increasing its tariffs to non-MFN levels, or taking other import-restrictive measures), the annual loss of U.S. exports to China could be significant, most likely affecting U.S. exports of grain, power generating machinery, aircraft, and fertilizer products. Also likely to be adversely affected would be overall U.S. economic relations with China, particularly U.S. investment and establishment of American businesses.

Action During the 105th Congress

In the context of China's active candidacy for membership in the World Trade Organization, H.R. 941 was introduced on March 3, 1997, to cease applying to China the requirements of Title IV of the Trade Act of 1974 and thereby grant to it permanent MFN status upon its accession to the WTO. The same action would result from identical bills H.R. 2708 and S. 1327, differing slightly in operative language from H.R. 941, introduced respectively on October 23 and 28, 1997.

Also tied to China's membership in the WTO are the provisions of Section 105 of S. 1303, authorizing a snapback of duty rates on imports from China to the pre-Uruguay Round MFN levels, thereby impairing China MFN status, if the President determined, upon the expiration of the U.S.-China trade agreement of 1979 (now slated for February 1, 2001, but renewable), that China is denying adequate trade benefits to the United States or not taking steps to become a full member of the WTO, but would, on the other hand, eliminate annual review of China's MFN status upon its admission to the WTO.

Unqualified permanent MFN status would be extended to China by S. 737, introduced on May 13, 1997.

On the other hand, China's MFN status with the United States could indirectly be adversely affected by H.R. 1140, introduced on March 20, 1997, which requires prior congressional approval of U.S. support of China's admission to the World Trade Organization, and the withdrawal of the United States from the WTO if China is admitted to the WTO without U.S. support. China's MFN status would in effect be nullified by H.R. 2814, introduced on November 5, 1997, requiring quarterly adjustments of U.S. tariffs on imports from China based on the amount by which China's tariffs on exports from the United States exceed U.S. tariffs on imports from China.

H.R. 1712, introduced on May 22, 1997, provides for snapback of duty rates on selected imports from China to pre-Uruguay Round levels if China is not according adequate trade benefits to the United states or not taking adequate steps to join the WTO, but would grant permanent MFN status to China upon its accession to the WTO.

H.R. 2188, introduced on July 17, 1997, would deny MFN treatment to goods produced or exported by the People's Liberation Army or a Chinese military company.

Hearings on various aspects of U.S. trade relations with China, not addressing specific pending legislation, were held as follows: by House Ways and Means Trade Subcommittee, on renewal of China's MFN status (June 17, 1997) and on the future of U.S.-China trade relations (November 4, 1997); by Senate Committee on Commerce, Science, and Transportation, on emerging trade issues with China, including the renewal of China's MFN status (June 5 and 18, 1997); and by Senate Committee on Finance, on the renewal of China's MFN status and U.S. trade policies toward China (June 10, 1997).

On May 29, 1997, President Clinton made the determination required to renew China's waiver (Pres. Det. 97-25), which was followed on June 3, 1997, by the introduction of H.J.Res. 79 and S.J.Res. 31 to disapprove the extension of China's waiver and MFN treatment. Hearings were held: on H.J.Res. 79 by House Ways and Means Trade Subcommittee on June 17, 1997; and on S.J.Res. 31 by Senate Finance Committee on June 10, 1997. H.J.Res. 79 was reported adversely by Ways and Means Committee on June 20, 1997 (H.Rept. 105-140), and on June 24, 1997, defeated with a vote of 173 to 259. This vote precluded any action on the Senate resolution of disapproval, and allowed the extension of China's waiver through July 2, 1998. On January 30, 1998, the President, by Presidential Determination 98-13, renewed for three years the trade agreement with China.

On June 3, 1998, the President again made the determination to extend China's waiver for another year (Pres. Det. 98-26) and transmitted it to Congress with a message (H.Doc. 105-262). Joint resolution to disapprove the renewal of the waiver was introduced in the House on June 4, 1998 (H.J.Res. 121), and referred to the Ways and Means Committee.

LEGISLATION

H.J.Res. 79 (Solomon)/S.J.Res. 31 (Helms)

Disapproves the annual extension of China's Jackson-Vanik waiver. Introduced June 3, 1997; H.J.Res. 79 referred to Committee on Ways and Means; S.J.Res. 31 referred to Committee on Finance. Hearings on H.J.Res. 79 held by House Ways and Means Subcommittee on Trade June 17, 1997; and on S.J.Res. 31 by Senate Finance Committee June 10, 1997. H.J.Res. 79 reported adversely by Ways and Means Committee June 20, 1997 (H.Rept. 105-140) and defeated with a vote of 173 to 259 on June 24, 1997.

H.J.Res. 121 (Solomon)

Disapproves the extension of the Jackson-Vanik waiver for China. Introduced June 4, 1998; referred to Committee on Ways and Means.

H.R. 941 (Ewing)

Ceases applying to China the provisions of Title IV of the Trade Act of 1974 and applies permanent MFN status to China on the day on which China becomes a WTO member. Introduced March 3, 1997; referred to Committee on Ways and Means.

H.R. 1140 (Gephardt)

Requires prior congressional approval, by a joint resolution enacted under a modified fast-track procedure, for U.S. support of China's admission to the World Trade Organization, and requires the withdrawal of the United States from the WTO if China is accepted into the WTO without U.S. support. Introduced March 20, 1997; referred to Committee on Ways and Means and, for a period to be determined by the Speaker, to Committee on Rules, for consideration of provisions falling within the jurisdiction of either committee.H.R. 1712 (Bereuter)

"China Market Access and Export Opportunities Act of 1997." Requires the President to determine and report to Congress, within 180 days after enactment, whether China is according adequate trade benefits to the United States and taking adequate steps to become a WTO member; if either determination is negative, he is to increase, within 180 days, duty rate on 1 or more imports from China at most to pre-Uruguay Round column 1 (MFN) levels; upon notification to Congress, he may modify the rate within this ceiling but not terminate it; permanent MFN status is to apply to China on the date it becomes a WTO member. Introduced May 22, 1997; referred to Committee on Ways and Means.

H.R. 2188 (Fowler)

Makes 13 findings with respect to the People's Liberation Army and its commercial activities. Provides for withdrawal of MFN treatment of goods produced or exported by the Chinese People's Liberation Army or a Chinese military company (as defined and determined in the bill). (The bill also authorizes the Secretary of the Treasury to exercise the trade-regulating authorities of the International Economic Emergency Powers Act with respect to commercial activity by a Chinese military company without the need for a Presidential declaration of a national emergency, and provides for penalties for violations of applicable regulatory acts.) Introduced July 17, 1997; referred to Committee on Ways and Means, and, for a period determined by the Speaker, to Committees on International Relations, National Security, and Banking and Financial Services.

H.R. 2708 (Hamilton)/S. 1327 (Roth)

Grants permanent MFN status to China by terminating the application of Title IV of the Trade Act of 1974 as of the date of China's accession to the World Trade Organization. H.R. 2708 introduced October 23, 1997; referred to Committee on International Relations and, for a period determined by the Speaker, to Committees on Ways and Means, and Banking and Financial Services. S. 1327 introduced October 28, 1997; referred to Committee on Finance.

H.R. 2814 (Taylor of Mississippi)

Requires quarterly adjustment of U.S. tariffs on imports from China, based on the amount by which China's tariffs on U.S. exports exceed U.S. tariffs on imports from China. Introduced November 5, 1997; referred to Committee on Ways and Means.

S. 737 (Baucus)

Authorizes the President to proclaim permanent MFN status for China and cease applying to it the provisions of Title IV of the Trade Act of 1974. Introduced May 13, 1997; referred to Committee on Finance.

S. 1303 (Lieberman)

United States-China Relations Act of 1997. Section 105 authorizes the President to proclaim an increase in duty rates on imports from China to pre-Uruguay Round MFN levels [thereby, in effect, nullifying China's MFN status] if he determines, upon the expiration of the U.S.-China trade agreement of 1979, that China is denying adequate trade benefits to the United States or not taking steps to become a full member of the WTO; eliminates annual review of China's MFN status, after China is admitted to the WTO. Introduced October 21, 1997; referred to Committee on Finance.

CHRONOLOGY

06/04/98 --H.J.Res. 121 introduced to disapprove the annual extension of China's Jackson-Vanik waiver and MFN status.

06/03/98 -- The President, by Pres. Det. 98-26 (H.Doc. 105-262), extended China's Jackson-Vanik waiver and MFN status for a year.. 01/30/98 --The President, by Pres. Det. 98-13 (63 F.R. 5857), renewed for three years the trade agreement with China.

11/05/97 --H.R. 2814 introduced to require quarterly adjustment of U.S. tariffs on imports from China, based on the amount by which China's tariffs on U.S. exports exceed U.S. tariffs on imports from China.

11/04/97 --House Ways and Means Subcommittee on Trade held a hearing on the future of U.S.-China trade relations and China's accession to the WTO.

10/28/97 --S. 1327, identical with H.R. 2708, introduced to grant permanent MFN status to China upon its accession to the World Trade Organization (WTO).

10/23/97--H.R. 2708 introduced to grant permanent MFN status to China upon its accession to the WTO.

10/21/97 --S. 1303 introduced, which in Section 105 authorizes a snapback of duty rates on imports from China to the pre-Uruguay Round MFN levels, if the President determines, upon the expiration of the U.S.-China trade agreement of 1979, that China is denying adequate trade benefits to the United States or not taking steps to become a full member of the WTO, but would eliminate the annual review of China's MFN status upon its admission to the WTO.

07/17/97 --H.R. 2188 introduced to deny MFN treatment to products of the Chinese People's Liberation Army or a Chinese military company.

06/24/97 --H.J.Res. 79 to disapprove the renewal of China's waiver and MFN status failed of passage by a vote of 173 to 259, allowing China's waiver and MFN status to remain in effect through July 2, 1998.

06/20/97 --H.J.Res. 79 to disapprove the renewal of China's waiver and MFN status reported adversely by House Ways and Means Committee (H.REPT. 105-140).

06/18/97 --Senate Committee on Commerce, Science, and Transportation completed hearings on emerging trade issues with China, including renewal of MFN status (see entry for 06/05/97).

06/17/97 --House Ways and Means Trade Subcommittee held a hearing on renewal of China's MFN status.

06/10/97 --Senate Finance Committee held a hearing on renewal of China's MFN status and U.S. trade policies toward China.

06/05/97 --Senate Committee on Commerce, Science, and Transportation held a hearing on trade issues with China, including renewal of MFN status.

06/03/97 --H.J.Res. 79 and S.J.Res. 31 were introduced to disapprove the renewal of China's Jackson-Vanik waiver and MFN status.

05/29/97 --In Presidential Determination 97-25 (H.Doc. 105-86; 62 F.R. 31313), President Clinton extended China's Jackson-Vanik waiver for one year.

05/22/97 --H.R. 1712 introduced to provide for snapback of duty rates on selected imports from China to pre-Uruguay Round levels if China is not according adequate trade benefits to the United states or not taking adequate steps to join the WTO; permanent MFN status would be applied to China upon accession to the WTO.

05/13/97 --S. 737 introduced to authorize the President to grant permanent MFN status to China.

03/24/97 --H.R. 1140 introduced to require prior congressional approval of U.S. support for China's admission to the WTO, and to require the U.S. withdrawal from the WTO if China is accepted into the WTO without U.S. support.

03/03/97 --H.R. 941 introduced to grant permanent MFN status to China on the day it becomes a member of the World Trade Organization.

06/27/96 --By a recorded vote of 141 ayes and 286 noes, the House failed to pass H.J.Res. 182 to disapprove the renewal of China's waiver and MFN status.

06/25/96 --H.J.Res. 182 reported adversely by the House Ways and Means Committee (H.Rept. 104-634).

--H.Res. 463, providing for consideration of H.J.Res. 182 and H.Res. 461 introduced and reported by the House Rules Committee (H.Rept. 104-636).

06/21/96 --In PRes. Determination 96-33 (61 FR 32631), the President reconfirmed, with considerable delay, satisfactory balance of past trade concessions and satisfactory reciprocation by China of U.S. tariff and nontariff barrier reductions, thereby extending the U.S.-China trade agreement through January 31, 1998.

06/18/96 --International Operations and Human Rights Subcommittee of the House International Relations Committee held a hearing on China MFN: Human Rights Consequences.

06/13/96 --H.J.Res. 182, to disapprove the President's renewal of China waiver and MFN status, was introduced.

06/12/96 --H.J.Res. 181, to disapprove the President's renewal of China waiver and MFN status, was introduced.

06/11/96 --House Ways and Means Trade Subcommittee held a hearing on U.S.-China trade relations and renewal of China's MFN status.

06/06/96 --S.J.Res. 56, to disapprove the President's renewal of China waiver and its MFN status, was introduced.

Senate Finance and Foreign Relations Committees held separate hearings on foreign policy implications of renewing China's most-favored-nation status.

06/05/96 --Senate Foreign Relations Subcommittee on East Asian and Pacific Affairs held a hearing on foreign policy implications of renewing China's MFN status.

06/04/96 --H.R. 3569 introduced to provide that China's MFN status may continue provided that Taiwan is admitted to the World Trade Organization by March 1, 1997.

05/31/96 --In Presidential Determination 96-29 (61 F.R. 29455; H.Doc. 104-223) President Clinton extended China's Jackson-Vanik waiver and MFN status for one year.

05/16/96 --House International Relations subcommittees on International Economic Policy and Trade, and on Asia and the Pacific held a joint hearing on the impact of MFN for China on U.S.-China economic relations.

CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS

U.S. Congress. House. Committee on Banking and Financial Services. China's economic ascendance: implications for the United States. Hearing, 104th Congress, 2nd session. July 29, 1996. (Serial No. 104-69.) Washington, U.S. Govt. Print. Off., 1996. 122 p.

U.S. Congress. House. Committee on International Relations. The impact of MFN for China on U.S.-China economic relations. Hearing, 104th Congress, 2nd session. May 16, 1996. Washington, U.S. Govt. Print. Off., 1997.51 p.

---- Subcommittee on International Operations and Human Rights. China MFN: human rights consequences. Hearing, 104th Congress, 2nd session. June 18, 1996. Washington, U.S. Govt. Print. Off., 1996. 164 p.

U.S. Congress. House. Committee on Rules. Providing for the consideration of H.R. 2058, the China Policy Act of 1995 and House Joint Resolution 96, disapproving extension of most favored nation status to the products of China; report (to accompany H.Res. 193). Washington, U.S. Govt. Print. Off., 1995. 1 p. (At head of title: 104th Congress, 1st session. H.Rept. 104-194.)

U.S. Congress. House. Committee on Ways and Means. Disapproval of most-favored-nation treatment for China; adverse report together with dissenting views (to accompany H.J.Res. 182). Washington, U.S. Govt. Print. Off., June 25, 1996. 11 p. (At head of title: 104th Congress, 1st session. H.Rept. 104-634.)

---- Disapproval of most-favored-nation treatment for China; adverse report together with minority and dissenting views (to accompany H.J.Res. 96). Washington, U.S. Govt. Print. Off., July 17, 1995. 12 p. (At head of title: 104th Congress, 1st session. H.Rept. 104-188.)

---- Disapproval of most-favored-nation treatment for the People's Republic of China; adverse report together with minority and dissenting views (to accompany H.J.Res. 79). Washington, U.S. Govt. Print. Off., June 20, 1997. 12 p. (At head of title: 105th Congress, 1st session. H.Rept. 105-140.)

U.S. Congress. House. Committee on Ways and Means. Subcommittee on Trade. U.S.-China trade relations and renewal of China's most-favored-nation status. Hearing, 104th Congress, 1st session. May 23, 1995. (Serial 104-15). Washington, U.S. Govt. Print. Off., 1995. 207 p.

U.S. Congress. Senate. Committee on Finance. China most-favored-nation (MFN) status. Hearing, 104th Congress, 2nd session. June 6, 1996. (S.Hrg. 104-871). Washington, U.S. Govt. Print. Off., 1997. 128 p.

U.S. Congress. Senate. Committee on Foreign Relations. Consequences of MFN renewal for China. Hearing, 104th Congress, 2nd session. June 6, 1996. Washington, U.S. Govt. Print. Off., 1996. 115 p. (At head of title: S.Hrg 104-696).

U.S. President, 1993- (Clinton). Extension of waiver authority for the People's Republic of China; communication from the President of the United States ... Washington, U.S. Govt. Print. Off., 1996. 5 p. (104th Congress, 2nd session. House Document 104-223). Communication dated May 31, 1996. (Contains Presidential Determination 96-29, and a report to Congress.)

---- Extension of waiver authority for the People's Republic of China; message from the President of the United States ... Washington, U.S. Govt. Print. Off., 1997. 5 p. (105th Congress, 1st session. House Document 105-86). Message dated May 29, 1997. (Contains Presidential Determination 97-25, and a report to Congress.)

---- Extension of waiver authority for the People's Republic of China; message from the President of the United States ... Washington, U.S. Govt. Print. Off., 1998. 5 p. (105th Congress, 2d session. House Document 105-262). Message dated June 3, 1998. (Contains Presidential Determination 98-26, and a report to Congress.)

FOR ADDITIONAL READING

Albright, Madeleine K. "Maintaining normal trade relations with China." (Statement before the Senate Finance Committee, June 10, 1997). United States State Department dispatch, v. 8, no. 6, July 1997: 1-2.

Chiu, Hungdah. "China's most-favored-nation status." American Asian review, v. 14, winter 1996: 117-130.

Duffy, Cristina Suarez. Harrold, Michael. Don't break the China: why continued MFN status helps Americans and Chinese. Citizens for a Sound Economy, Washington, 1996. 18 p. (Issue analysis, no. 33, June 25, 1996)

Goldman, Charles A. U.S. commercial policy toward China: policy process and future prospects. Santa Monica, CA, Center for Asia-Pacific Policy, RAND, 1995. 20 p. (Working Paper 95-1).

International Business and Economic Research Corporation. The costs to the United States economy that would result from removal of China's most favored nation status. Washington, June 1966. (Duplicated.) 31 p. + Appendices (33 p.)

Palczer, Nicole M. "The most-favored-nation debate: China's strategy against US linkage." World outlook, no. 20, summer 1995: 99-123.

Shaffer, Bob. "China's MFN status." Congressional record, v. 143, no. 112, Aug. 1, 1997: E1619-1621.

Sirico, Robert A. "China and the trade warriors." The Wall Street journal, June 11, 1997: A22.

Wildavsky, Ben. "Beyond MFN." National journal, v. 28, June 1, 1996: 1205-1208.

CRS Reports

China-U.S. economic relations: the costs of withdrawing most-favored-nation tariff treatment and other questions; a briefing paper... Washington, April 5, 1994. 74 p.

CRS Report 94-514 E. Granting most-favored-nation status to China as a market economy country, by Vladimir N. Pregelj. 9 p.

CRS Report 94-531 F. China's MFN status: implications of the 1994 decision, by Kerry Dumbaugh. 6 p.

CRS Report 96-490 E. Legislative procedure for disapproving the renewal of China's most-favored-nation status, by Vladimir N. Pregelj. 6 p.

CRS Report 96-904 E. Direct cost-effect of withdrawing China's most-favored-nation status, by Vladimir N. Pregelj. 6 p.

CRS Report 96-923 E. Most-favored-nation status and China: history, current law, economic and political considerations, and alternative approaches, by Wayne M. Morrison, Vladimir N. Pregelj, Kerry Dumbaugh, and Jeanne Grimmett. 30 p.

CRS Report 97-639 ENR. China's most-favored-nation status: U.S. wheat, corn, and soybean exports, by Geoffrey S. Becker. 6 p.