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China The Favored Nation

Updated February 7, 2019

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China The Favored Nation china the favored nation What 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 1970’s 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 country’s 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 China’s 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 China’s 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 China’s gross national product. China will likely prove to be a significant market for the U.S. in the future. China is one of the world’s 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, China’s 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 China’s 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. China’s trade policies have become a focal point in the annual congressional debate over renewing China’s 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, China’s 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 China’s most-favored-nation trade status, and such vetoes were consistently sustained in the Senate. As a presidential candidate, Bill Clinton criticized the Bush Administration’s China policy and pledged to take a tougher approach to United States-Chinese trade relations, including conditioning China’s most-favored-nation trade status renewal. To date many of the very same issues that the United State objected to in the past are still going on every day in China.

From the American political viewpoint it would seem only right to continue to renew China’s most-favored-nation trade status. Politicians are concerned about is whether or not the United States economy is strong and if it is not, then finding something that they can do to make it that the economy is getting better. So most of the world turns a blind eye to many of the issues that China is currently having and just disregards them. This meaning that if there were any human rights violations or other types of acts that violated the pact that China signed to earn most-favored-nation trade status, then the United States have a responsibility.

A responsibility to do whatever it can as the United States to ease and or end any of the suffering or unfair hardship that the people of China are currently experiencing. It is our duty as human beings to ensure that a high global standard of living. This should be the bottom line. Because the way that it seems now, the United States is much more concerned about getting inexpensive goods from China and being able to help China update its infrastructure. The question that has to be asked annually when a vote about China’s most-favored-nation trade status comes up is that if it is all right for China to do the things that they do. If we decide that China’s violations of their most-favored-nation trade status are not forgivable then the United States need to cut its economic ties with China.

Decisions like these would be very difficult for the economies of both nations, but it comes down to the fact that money is not the most import thing. Other values have to be placed before the interest of making as much money as possible. (-) Other concerns about future dealings with China have also arisen. The United States has voiced its concerns in recent about China’s missile and nuclear proliferation activities. These concerns led the United States to limit United States exports to China of supercomputers, satellites and parts, and missile technology. Why is our most favored trading partner-stockpiling weapons? For what reason is China moving nuclear related materials and technology to Pakistan? Needless to say these were some very unsettling events that took place in the early months of 1996.

Actions likes these could very well be reason alone for China to lose its most-favored-nation trade status. But yet they were allowed to keep it. The United States Customs Service has found evidence on multiple occasions that China has attempted to circumvent or otherwise break United States textile quotas laws. This was done by transshipping Chinese products through other countries to the United States by the use of false country of origin labels. Another method was the misclassification of textile and apparel products. The United States Customs Service estimates that such transshipments and other circumvention methods may total up to two billion dollars each year.

In addition, the United States has charged that certain Chinese entities have sought to avoid United States tariffs by undervaluing textile and apparel shipments On January 6,1994, the United States announced that a large reduction of 25-35% below the 1993 level of China’s textile and apparel quota would result due to China’s refusal to accept anti-circumvention provisions in a new textile agreement. The new quota levels were set to take effect on January 17, 1994. However, on that date, the United States and China came up with a new textile agreement that would effectively reduce the growth rate of China’s textile exports to th …

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China The Favored Nation. (2019, Feb 07). Retrieved from