There are eight prinipal reasons why Congress should approve an extension of MFN status for China.
Reason #1
Revoking MFN will harm those America wants to help.
Discontinuing MFN status for China would harm U.S. workers. The
U.S. exported over $12 billion of goods and services to China in
1995, and American trade with China supports over 200,000 high-wage
American jobs, as well as tens of thousands of additional jobs in
U.S. ports, retail establishments, and consumer goods
companies.
Reason #2
Revoking MFN would threaten U.S. business and investment. The
International Monetary Fund estimates that China is now the world's
third-largest economy after the United States and Japan, and could
emerge as the world's largest economy in the 21st century. The
World Bank has calculated that China will require nearly $750
billion in new investments to fund new industrial infrastructure
over the next decade. China needs new aircraft, power generators,
telecommunications, computers, and other high-skill, high-wage
technologies that must be supplied from overseas. American
companies should be getting the contracts to build these projects.
Continued American leadership in these key technology sectors is
vital to sustaining long-term U.S. economic growth and creating
high-wage, high-skill American jobs. If MFN is revoked, China's
needs will be filled by Japanese and European business and
investment. The result will be American jobs lost to competitors
overseas.
Reason #3
Revoking MFN would jeopardize economic reform in China. The
last 15 years of economic reform in China have increased economic
freedom and improved the livelihood of one quarter of the world's
population. American companies operating in China have contributed
to a significant expansion of economic freedom and choice for the
Chinese people. The U.S. must build on this foundation to encourage
the further opening of China's economy and society. To be sure, MFN
will not guarantee the rise of democracy in China, but at least it
keeps China open to influences and pressures from the outside
world.
Reason #4
Revoking MFN would harm the economies of Taiwan and Hong Kong.
The prosperity of both Taiwan and Hong Kong is heavily dependent on
investment and export production in China. Abandoning MFN would cut
Hong Kong's economic growth in half. It also would harm Taiwan's
economy. Billions of dollars in Taiwanese investment and
labor-intensive industries have moved to the mainland, unabated by
current tensions with China. Many of the light industrial goods on
which Taiwan's economic miracle depends are now produced on the
mainland and exported through Hong Kong to the United States and
other markets. Many of the goods marked "Made in China" actually
are produced by countries the U.S. seeks to support -- Hong Kong
and Taiwan.
Reason #5
Revoking MFN will not improve human rights conditions in
China. History shows that China is far more oppressive against its
people when isolated from the outside world. This was clearly the
case during the Cultural Revolution of the late 1960s. Human rights
improvement is a long-term process that requires U.S. attention,
but also U.S. patience. Taiwan's success in improving the economic
and political well-being of its citizens demonstrates that this is
both possible and desirable in a Chinese society.
Reason #6
Revoking MFN will not encourage China to adhere to
international limitations on transfers of nuclear technology or
weapons of mass destruction. China should answer the charges that
it is supplying Pakistan with key nuclear and missile components in
violation of its obligations under the Missile Technology Control
Regime (MTCR) and the Nuclear Non-Proliferation Treaty (NPT). The
MTCR monitors and controls missile components and capabilities,
while the NPT is a framework for control and reduction of nuclear
weapons. In the past, China has shown its displeasure with
America's overtures to Taiwan and criticism of China's human rights
record by selling dangerous technology to such unstable regimes as
those in Pakistan and Iran. Revoking MFN could generate another
series of sales. The U.S. must investigate the recent allegations
of missile sales to Pakistan, and it has every right to ask China
to explain itself. If such sales have taken place, American law
dictates that technology and commercial sanctions be imposed. These
sanctions, if not waived by the President, should be specific and
targeted on the responsible Chinese enterprise, to avoid
jeopardizing unrelated U.S. activities in China, rather than
targeted on all U.S.-financed projects in China, as the law
requires. Revoking MFN would go even further, adversely affecting
all U.S. commercial transaction with China. In this area, MFN is
simply the wrong tool.
Reason #7
MFN is not special treatment. MFN trade status is a
fundamental principle on which the World Trade Organization
operates. The WTO is the multilateral organization that sets the
rules for international trade. MFN is the normal trade status
granted to all but a handful of countries. In the absence of the
Cold War strategic framework, it is the foundation of basic
international commercial relations. Discontinuing MFN to China is
tantamount to imposing trade sanctions on China. Such sanctions
should be imposed only when a country poses a special threat to
American security. As difficult as China now is, it does not
present such a threat.
Reason #8
Revoking MFN would set the U.S. on the road to confrontation
with China. Abandoning MFN for China would lead to Beijing's
isolation, making it less likely that China would integrate into
the international system in a way that is favorable to U.S.
interests. For the United States and its allies to deal effectively
with nuclear weapons proliferation, unfair trade practices, and
human rights violations, China must be engaged, not an enemy.
Even though the U.S. should continue MFN trade status for China, however, it should not ignore Beijing's recent bellicose actions against Taiwan. To demonstrate displeasure with Beijing's missile diplomacy against Taiwan, and to reward Taiwan once it meets economic criteria for membership in the World Trade Organization, the U.S. should expedite Taiwan's bid to join the WTO ahead of the PRC. In the past, China has insisted that the PRC should accede to the WTO ahead of, or at the same time as, Taiwan. The U.S. should be prepared to exercise leadership in building international consensus for Taiwan's entry into the WTO, even in the face of China's determined opposition.
Conclusion
Conditioning or revoking MFN under current circumstances would eliminate any possibility of cooperation from Beijing, rendering the U.S. less effective in its efforts to limit transfers of nuclear technology and weapons of mass destruction, correct unfair trade practices, and foster development of the rule of law in Asia. Discontinuing MFN would not improve social and commercial conditions in China, but it would come at great cost to Americans and their friends in Hong Kong and Taiwan. For the U.S., revoking or conditioning MFN gains too little and risks too much. Most-favored-nation trade status for China should be renewed unconditionally.
