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Issue of Most Favored Nation Status for China
Term Paper ID:27929
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Essay Subject:
Review & analysis of issues related to China's most favored nation status under the Bush & first Clinton administration. Topics include status of Hong Kong & human rights violations.... More...
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9 Pages / 2025 Words
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Paper Abstract:
Review & analysis of issues related to China's most favored nation status under the Bush & first Clinton administration. Topics include status of Hong Kong & human rights violations.
Paper Introduction:
The issue of the most-favored-nations (MFN) trade status for China has been argued heatedly at least since the Tiananmen Square incident in 1989, with a conflict between those who believe that the only way to change China is to continue trading with her against those who feel that such egregious conduct should not be "rewarded" by favorable treatment. This year, in spite of opposition to the continuation of MFN status for China, President Clinton renewed it, subject to certain changes within China as well as certain proofs that China is not breaking international agreements on the use of prison labor and other matters. The issue remains a strong point of contention, and whatever China does is scrutinized by both sides to see if she is living up to her agreements or in some way abrogating them and thus endangering MFN status in the future.
Text of the Paper:
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The Administration (first thatof Bush and now that of Clinton) feels not only that trade is a way ofgaining influence but also that some leeway must be given for culturaldifferences. consumers. American companieslobbied Congress hard to prevent any bill from passing that would havelocked American companies out of the growing economy of China. The policy is seen as a compromise toovercome the statement between Congress and the Administration over tradewith China (Cranford, 1993, 1349). U.S. law, it is illegal to import prison products" (Borrus,1991, 36). investors with holdings in China have already had to wrestlewith the human rights issues involved and have often done so by finessingthe matter. The issue of the most-favored-nations (MFN) trade status for Chinahas been argued heatedly at least since the Tiananmen Square incident in1989, with a conflict between those who believe that the only way to changeChina is to continue trading with her against those who feel that suchegregious conduct should not be "rewarded" by favorable treatment. Mosher writes: "At the risk ofoversimplification, it may be said that the Chinese Laogai is the Sovietgulag with thought reform and a profit motive added" (p. The government says it can prove that Blissknowingly purchased goods from these prisons. Investment in Hong Kong." Business America (November 18, 1991), 12-13.Gibney,Frank, Jr. In addition to the Bliss raid,the Customs Department has blocked the entry of other goods made in Chineseprisons: "Under U.S. The Basic Law for the future Hong Kong takes effect July1, 1997. Asia Watch states that China brokepromises made to the United States to secure MFN status. Just as manypolicymakers have supported MFN as a way of encouraging change in China, sodo many see the return of an already strongly capitalist Hong Kong to Chinaas a way of furthering the same ends. Most of thisbusiness community report that their business efforts to date have beenonly slightly affected by the aftermath of the Tiananmen Square incidentand the recent austerity drive undertaken by China. business interests on the scene seeconsiderable potential and should serve as an example to other investors.The issue of the use of prison labor in the manufacturing of products thensent to the U.S. President Bush claimed that the policy wasbased on what he called "constructive engagement," meaning that continuinga dialogue with the Chinese was the best way to encourage reform over time. Criticism of the Chinese system stems from a belief that coercion isused and that the purpose of the work is added punishment rather than anyform of rehabilitation. "The Outlook for U.S. The annual debate over MFN brings the issueto light again and again (Gibney, 1993, 46). How well it works will be judged next June. Lord had been ambassador to China from 1985 to 1989, andhe had disagreed with George Bush's policy of conferring MFN status toChina without conditions (Palmer, 1993, 855). does notsupport their struggle for freedom (Campbell, 1992, 19). MFN status entitles a country to economic preferences granted by theU.S. One of the mostsignificant regions is that of Hong Kong, slated to become part of Chinaonce more in 1997. Thepolicy also sends a message to the Chinese people that the U.S. Hong Kong is operating as if it has abright economic future and will be able to maintain its present economicstructure even after 1997. "Bush Is Setting the Bloodhounds on Beijing." Business Week (December 23, 1991), 36.Borrus, Amy. Critics do not agree that the progress has been substantial ortimely. The U.S. In1992, visiting American business people said it was not their business todiscuss human rights with the Chinese. Theystate that MFN status should not be renewed and that the U.S. Human rights expertspoint out that China continues to arrest and try supporters of the nation'spro-democracy movement while also keeping thousands of political prisonersin jail. President Bush responded topressure from Congress and elsewhere to do something about this matter,especially because it was an election year. Policy Objectives and MFN Status for China," U.S. The goal of the prison system is toreform prisoners into new socialist men through study of party approveddocuments and self-criticism as well as through hard labor. 2) Encourage responsible and cooperative Chinese inter-nationalbehavior, particularly with respect to non-proliferation. But today many American executivesare beginning to do just that, perhaps from a perception that the Americanpublic is uneasy with the way China is being given special treatment andperhaps out of a genuine concern that human rights policies are notchanging as hoped in the past. This particular defectionwill have little effect on China, but a wholesale defection would. They report that their future plans are to continueas they have been, with some taking a wait-and-see attitude. The fall of Communism in most of theworld has had little effect on the People's Republic of China, a nationwhich resisted any move toward democracy or any significant change withtanks in Tiananmen Square two years ago. Proponents of MFN say this is all to the good and will lead tochange in time; opponents say it is the problem and that the Chinese systemshould not be bolstered until it changes its view of human rights. Some companies have abandoned the fight--Levi Strauss & Co.announced this year that it would make its clothes elsewhere because of the"pervasive violation of human rights" in China. The concessions on borrowing and investment for the massiveconstruction project now beginning is intended to help Hong Kong maintainits position as a world leader in international commerce. TheChinese view winning MFN status as very important. Much of the American concernabout this issue may be related to the fact that it was derived from theSoviet system and that it supports one of the few Communist systems left inthe world. On the one hand, President Bush accords China most-favored-nations trade status, while on the other, Congress would like tofind ways to link any such move to an improvement in human rights. Bliss. They also note that many of the goods imported to the U.S. only to its best trading partners. 4) Improve and sustain a trade relationship from which Americans asboth producers and consumers could benefit. The United States is the largest foreign investor inthe manufacturing sector for Hong Kong, accounting for 31 percent of totalinvestment. "Will Congress Shanghai China Policy?" Business Week (February 22, 1993), 59.Campbell, Todd. Late in1991, the Bush Administration utilized the Customs Service to confiscatemachine presses that had been manufactured in Chinese prison factories froma company named E.W. Together, they pledge that Hong Kong will have a governmentindependent in all matters except defense and foreign affairs. Patten's Message:China Policy," 1993, 28). The U.S. Hong Kong is also to remain a free port fully open tothe world. Mosher sees the system as the natural outgrowth of a politicalstructure that seeks to bring all Chinese under the control of a governmentautocracy: "Over the years, it has also become an important component ofChina's planned economy" (p. TheUnited States has agreed to an initial bilateral investment treatynegotiating session that began in November 1991 (Gadzinski, 1991: p. 49). In 1991, Chinahad promised to allow 2 jailed dissidents to leave China, but only twowere freed. Bills before Congress would have done much the samething by tying MFN to specific conditions, and Clinton's compromise keptCongress from passing that legislation this year ("Mr. has ties with other countries in the region as well, andthese ties have been cited by both proponents and opponents of MFN asreasons for either keeping or changing the policy. If the President wants to renew MFN next yearand Congress does not believe that sufficient progress has been made,however, the battle is likely to develop once more. 3) Promote peaceful and democratic reform within China. fromChina are made by political prisoners under slave-labor conditions. Department of State Dispatch (July 6, 1992), 551-554.Mosher, Steven W. China also pledged to stop exporting goods made by prisoners,but that was before the seizure of the diesel engines noted above. President Bush granted the status toChina for three years, and President Clinton has now continued it. Thisyear, in spite of opposition to the continuation of MFN status for China,President Clinton renewed it, subject to certain changes within China aswell as certain proofs that China is not breaking international agreementson the use of prison labor and other matters. U.S. policymakers. The dual forces creating more and more opposition to continuing MFNfor China can be seen in memories of Tiananmen Square and in the decreasein communism elsewhere in the world. "Lord Seeks China Consensus," Congressional Quarterly (April 3, 1993) 855.----------------------- 11 In 1992, they assessed Bush's policy and found that after threeyears of constructive engagement, there had been little improvement in thehuman rights situation in China, and indeed some saw a heightening ofrepression in that time period. By thesame token, the continuing of U.S. Some 18, Americans form an expatriate business communitythat is even larger than that of the British, and it grows by at least1, Americans each year. The present agreement ends inJune 1994, and Clinton has stated that the agreement will then be renewedif certain conditions have been met. U.S. However, in 199 China'sDirector of Hong Kong and Macao Affairs stated that after 1997 Hong Kongwould carry on its open market system and remain an international trade andfinancial center. It isbelieved by many that constructive engagement might actually harden theChinese government's hard-line position on human rights by sending themessage that it could continue repression with little real cost. BibliographyBorrus, Amy. It is the President who decides whichnations will receive MFN status. He assertedPresident Bush's continuing commit-ment to MFN status for China and alsostated the goals of the Administration: 1) Promote respect for human rights. should infact punish China for its internal policies by restricting American tradewithin that country as well. in turn sells China more than $6billion worth of products each year. has not simply ignored the pattern of violations seen inChina, though critics do say the U.S. firms inHong Kong are planning their investments and operations within a three-to-five-year horizon and are reluctant to extend forecasts beyond this limit.There are certain legal documents that should engender optimism, however.The agreement between the United Kingdom and the People's Republic of Chinahas the status of an international treaty and is so registered with theUnited Nations. Criticsof the policy state that giving MFN status to China overlooks thecontinuing, widespread violations of human rights in that country whilealso sending the wrong message to the leadership. To allayinvestor uncertainty further, the Hong Kong government is trying tonegotiate bilateral investment treaties with a number of important foreigninvesting countries, an effort approved by both the British and Chinesegovernments, both of which will have to agree to any such treaties. And a desirefor profits has driven much of the business community to ignore humanrights violations in spite of some efforts at calling for change as notedabove. The work camps are known as labor reform and laborre-education camps, recalling other Communist systems utilizing forcedlabor. "Clinton Ties MFN for China to Human Rights Gains," Congressional Quarterly Weekly (May 29, 1993), 1349.Gadzinski, Peter S. In any case, MFN is now viewed as one of the major ways ofgetting China to comply with change in this system and to promote enhancedfreedoms in that country. businessinterest and should remain so if the People's Republic of China lives up tothe agreements that have been signed. "Chinese Prison Labor." Society (November/December 1991), 49-59."Mr. "The Trouble With China," Newsweek (May 17, 1993), 46.Kanter, Arnold. There are efforts in Congress to ban such importsbecause of the way the goods are produced. China is one of theUnited States' major trading partners, selling the U.S. is certain to remain a major question to be answeredbefore the next MFN round. Patten's Message: China Policy," The Economist (May 8, 1993), A28.Palmer, Elizabeth A. 49). 13). investment in China bolsters the Chineseeconomy. As noted, President Clinton has tied the continuation of MFN withChina's meeting certain human rights goals. The system wasborrowed from the Soviet gulag, with some modifications to account forChinese conditions on Chinese soil. some $19 billionworth of goods each year, and the U.S. Clearly, the Hong Kong market is vital to U.S. "China: A Favored Nation?" Scholastic Update (September 18, 1992), 18-19.Cranford, John R. Clinton echoed this policy when heappointed Winston Lord as Assistant Secretary of State for East Asia andPacific Affairs. The concern over 1997 stems first from the factof the return of Hong Kong to Chinese control and second to the crackdownin the People's Republic of China against the demonstrators in TiananmenSquare in 1989, causing many to fear what the Chinese would do to thesocial and economic structure of Hong Kong. This approach has led to positive results in the areas of human rights, non-proliferation, and trade that we established as central to our bilateral relations (Kanter, 1992, 552). has not done enough since the natureof the leadership was made clear in the Tiananmen Square massacre. The issue remains a strongpoint of contention, and whatever China does is scrutinized by both sidesto see if she is living up to her agreements or in some way abrogating themand thus endangering MFN status in the future. Mosher (1991)explains: "Whether operating factories, mines, or farms, each facility isnot only required to be self-supporting, but is expected to turn a profitfor the state" (p. The essentials of the MFN policy with regard to China was explainedby Arnold Kanter, Under Secretary for Political Affairs, in 1992 before theSubcommittee on Trade of the House Ways and Means Committee. The Chinese point out that American prisonersalso work and produce goods, but there are vast differences between themore voluntary American system, which in any case does not involvepolitical prisoners, and the Chinese system. Supporters of MFN also point out that cutting trade with China would hurtthe government less than it would hurt the private exporters in China whoare crusading in the move within China away from communism and towardcapitalism (Campbell, 1992, 18-19). Proponents and opponents alike are certain to take greater account ofHong Kong as we approach 1997 and the change in status for thatprotectorate. Still, investors are concerned about what will happen. "U.S. Three-quarters of thecompanies report that their overall performance in the next three yearswould be satisfactory. The Administration worked for these goals, said Kanter, throughengagement rather than confrontation: We have sought to work actively with the Chinese on specific, targeted concerns while at the same time encouraging the changes in Chinese society that naturally follow from openness to and engagement with the outside world. Goods from countries on the MFNlist are allowed into the United States at the lowest possible import tax,for instance, making the goods more attractive to U.S. Some $1 million worth of these goods wereexported to the United States in 199 , with goods such as textiles, wines,teas, and machinery. George Bush found that the policy of constructive engagement wasbeneficial, and while Clinton has disagreed with the way Bush administeredthe policy, it is clear that he favors something similar with moreconditions attached. This has created a dilemma forU.S. Oneabuse of human rights that has come to light that reflects directly ontrade issues is the fact that China is using prisoners as forced labor toproduce goods and services bolstering the Chinese economy. 49). In spite of the pressure from the business community, Congress wasclearly headed toward placing restrictions on the MFN policy when Clintonoffered his compromise (Borrus, 1993, 59).
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