China as Most Favored NationEssay Preview: China as Most Favored NationReport this essayChina as Most Favored NationEssay written by Luke AllisonWhat is the debate on weather or not China should retain favored-nation trading status all about? Is it really a decision on what is best economically for the United States, and China.
Or is it: the issue of Chinese human rights violations and the fact that if the United States where to revoke the favored nation status of China it would have a profound negative impact on the U.S. economy alone.
(+)Most-favored-nation trade status started in the United States as a version of the European preferential trade system. The Carter Administration first granted most-favored-nation trading status to China in 1980, following the historic efforts of President Nixon during the 1970s to restore diplomatic ties. Historically, a significant difference existed between the unconditional most-favored-nation clause in European trade law and the American version of conditional most-favored-nation. Under unconditional most-favored-nation status, one countrys extension of tariff concessions guarantees the same concessions to all nations associated with it through commercial treaties. American conditional most-favored-nation status provided treaty signatories only the opportunity to negotiate most-favored-nation status when most-favored-nation status was extended to another trading partner. Thus meaning that the United States gives significant economic advantages to one nation in the form of most-favored-nation trading status.
Under the Trade Act of 1974, most-favored-nation status could only be granted to China through a Sino-American bilateral commercial agreement and satisfaction of the Jackson-Vanik Amendment requirements. The Jackson-Vanik amendment states that the President of the United States may grant a communist country such as China most-favored-nation trade status if it was in conjunction with a trade agreement and upon proper improvement that China would permit emigration. Also China would have to satisfy that they are moving toward improving current policies. The conclusion of the US-PRC commercial accord in July 1979, and the initial waiving of the Jackson-Vanik requirements, and with Congressional approval, most-favored-nation status was granted to China. This action sealed the successful efforts of the Carter Administration to create social and economic ties through Sino-American relations.
The renewal of Chinas most-favored-nation trade status has been supported by Chinese liberalization of its own emigration policies. Six hundred and twenty-five thousand Chinese citizens traveled abroad in 1990. The Chinese government in 1990 issued 280,000 new passports. During the same year, the United States issued seventeen thousand immigrant visas through consular offices in China, the full number allowed by American immigration law. The principal restraint to Chinese emigration has arisen not from Chinese emigration policies but from the unwillingness of other countries to accept immigrants. Most-favored-nation status for China continues to provide an incentive for further advancement in this area as well as facilitating the contacts that the Carter administration established well over a decade ago.
By granting China most-favored-nation trade status the United States has started that long and difficult process of bringing China out of its international dark ages. In order to live up to the terms of most-favored-nation trade status China has had to become more open to social and economic changes. These reforms included more economic freedom, easier access for foreign direct investments. The economic developments these reforms have been to a main cause for Chinas newly increased gross nation product. Over a ten-year period from 1978 to 1988 most-favored-nation trade status was directly responsible for an annual ten percent growth in Chinas gross national product.
China will likely prove to be a significant market for the U.S. in the future. China is one of the worlds fastest growing economies, and with its efforts to reform, improve, and modernize its economy could come a significant increase in demand for imports. Infrastructure development, in particular, has been made a major priority, and the Chinese government has also announced that foreign firms will be allowed to participate in a wide variety of projects. This is very important to the United States because it mean that there is for the foreseeable future a market for their goods and services in China. Also as a result of the most-favored-nation trade status that China currently holds it makes the opportunity for international business ventures there even that much interesting because of the possibility of high profits.
Another advantage for the United States is in the area of imports from China. The surge in United States imports of Chinese products over the past few years can be largely explained by two factors. First, Chinas production of low-cost, highly labor-intensive products has grown greatly in recent years. A main reason for this is that the price that which the Chinese are able to produce goods is at a lower level than almost any other producer. In addition the United States demand for product of this type has and mostly likely will continue to rise in the future. In response Taiwan and Hong Kong have moved many of their production firms into China to take advantage of lower labor costs. This is good for the economy of China and it also helps to supply the United States with low cost goods.
(=)The growing U.S. trade imbalance with China, and the exclusive market segments of Chinas trade regime have become of major concern to many U.S. policymakers. Over the past few years, the U.S. trade deficit with China has surged. It rose to nearly 50 billion in 1997 and could top or exceed 60 billion in 1998.
Chinas trade policies have become a focal point in the annual congressional debate over renewing Chinas most-favored-nation trade status. Along with other non-trade issues, including but not limited to human rights violations, weapons sales, and foreign policy issues. Over the past several years, efforts have been made in Congress to terminate, or attach additional conditions to, Chinas most-favored-nation trade status, although none have as of yet succeeded. This policy was opposed by the Bush Administration, which sought to deal with these issues outside the most-favored-nation trade status process. As a result, President Bush vetoed congressional attempts to revoke or condition Chinas most-favored-nation trade status, and such vetoes were consistently sustained in the Senate. As a presidential candidate, Bill Clinton criticized the Bush Administrations
in a speech last year. Bill Clinton called for ending the “inconvenience of a trade system that rewards the weak and ill.”[8] However, as Bill Clinton testified a year later, “I wish we had known more about how Chinas trade policy could end and the opportunities and consequences of this trade policy” instead of focusing “on how to address other areas of our trade relationship with Asia.”
[[Page S3197]] Under current U.S. President Obama, the two policies—one, that Chinas most-favored-nation trade status has always been treated with “special disdain,” the other, the terms that the trade policy of the U.S. has always been the subject of trade, has been largely abandoned. With President Obama’s renewed effort to close the Trade in Services Agreement with North Korea, or at least reduce the trade sanctions President Obama has imposed on those who work with and benefit from China, this issue’s most-favored-nation status in the bilateral trade relationship has been permanently taken away from the White House. For the past several years in Congress, these two policies have been treated as close rivals and as a threat to the integrity of the international order, and has been viewed under many of the same conditions as NAFTA, the U.S.-Mexico Free Trade Agreement. For many years, in recent years, the Administration has been pressing to undo the sanctions, which were imposed in 2012 after numerous high-profile corruption scandals were exposed and President Chiang’s economic troubles. As this issue has grown heated in Congress, as did the continued criticism by Congress concerning Chiang’s corruption, several of the Administration’s most favored-nation trade status programs have been replaced by non-trade issues. As of October 2011, some of these non-trade programs have been replaced by new priorities, such as the continued negotiations between the United States and China to maintain peace and stability. In the past twelve months alone, there have been two major foreign policy events that raised the visibility of the issue of China’s trade with the U.S.: First, the Trans-Pacific Partnership (TPP), the biggest U.S. energy agreement in history, was replaced by a single-entity trade deal in the form of the Comprehensive Economic and Trade Agreement (CETA). The TPP has become the primary pillar of U.S.-China economic and development relations, and has greatly expanded the U.S.-China trade relationship. Over the past two years, there have been two major foreign policy events that raised the visibility of the issue of Beijing’s trade with the U.S.: First, the recent economic sanctions against China and other Chinese state sponsors of crime that have been imposed by Secretary of State John Kerry, and continued by President Obama, and the recent announcement of the Comprehensive Economic and Trade Agreement (CETA). As the two sides move to negotiate better trade relations, however, the Administration is currently being portrayed as failing to protect American businesses and workers. These sanctions and the Obama Administration’s repeated attempts to shut down these trade agreements will continue to deepen the problem of economic insecurity. If the Administration fails to take action through the CETA or other efforts to re-impose sanctions, China and its Chinese allies will eventually begin to suffer. In particular, economic insecurity and the instability that Beijing and its Chinese allies have suffered in the past ten years is going to continue to increase and will likely continue to worsen as Beijing and its Chinese allies continue to expand