[Congressional Record Volume 142, Number 125 (Thursday, September 12, 1996)]
[Senate]
[Pages S10404-S10405]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      THE ANNUAL CHINA MFN DEBATE

  Mr. THOMAS. Madam President, the theater that is the annual China MFN 
debate has once again--predictably--fully run its course. The President 
recommended extension, United States business and our Asian trading 
partners held their collective breath, there was a lot of rhetoric on 
the floor of the House condemning China for a variety of serious 
misdeeds, and in the end a vast majority of the House voted to renew 
MFN yet again. In the wake of the debate, I believe that we should take 
a serious look at scrapping this annual drama and replacing it with a 
more pragmatic and workable solution.
  That the yearly MFN debate should be scrapped seems evident from an 
examination of its relative pros and cons. What is gained by the annual 
debate? Aside from an opportunity for some in Congress to air their 
grievances with the PRC, not much. What is lost, on the other hand? 
Quite a bit.
  First, the debate regularly disrupts our bilateral relationship by 
making the Chinese feel unfairly singled out, and not without reason. 
Most favored nation is a misnomer. Although the phrase implies some 
special treatment that the Uunited States passes out discriminately, it 
is actually the normal trading status with all our trade partners. Only 
seven countries, the majority of which we consider pariah states, are 
not accorded that status: Afghanistan, Azerbaijan, Cuba, Laos, North 
Korea, Vietnam, and Serbia. In addition, one of the main reasons given 
by proponents of revoking China's MFN status is that country's arguably 
abysmal human rights record. But while other countries have equally 
disturbing human rights records, no one has moved to revoke their MFN 
status. Turkey has long persecuted its Kurdish minority; Russia has 
killed hundreds of civilians in Chechnya; Indonesia invaded East Timor 
and continues to occupy the island illegally, jailing and killing 
Timorese dissidents; Nigeria jails and executes opponents of the 
Government-- yet all four enjoy most favored nation trading status.

  Second, the annual debate is damaging to the interests of U.S. 
companies doing business in the PRC. Companies find it very difficult 
to make long-term investment plans when they have to worry every year 
that the MFN rug might be yanked out from under them. From the Chinese 
side, the annual MFN renewal requirement raises the risk of doing 
business with U.S. firms; so instead, they have a strong incentive to 
do business with our European competitors who have no such constraints.
  Third, the threat of revoking China's MFN--an empty threat in my 
view--is not an effective foreign policy tool. Revoking China's MFN 
status would hurt us more than the Chinese--the economic equivalent of 
cutting off your nose to spite your face. In 1995, United States 
exports to China directly supported around 200,000 American jobs. 
Revoking MFN, and the Chinese retaliation that would surely follow, 
would only serve to deprive us of a rapidly growing market. China is 
perfectly capable of shopping elsewhere for its needs, and our allies 
are more than happy to fill any void we leave. We recently saw a prime 
example of that willingness; last month Premier Li Peng traveled to 
France where he signed a $2 billion contract to buy 33 Airbuses--a 
contract that Boeing thought it was going to get.
  Fourth, instead of using MFN as a carrot-and-stick with the PRC, I 
believe the best way to influence the growth of democratic ideals, 
human rights, and the rule of law in China is through continued and 
reliable economic contacts. I think anybody who has been to China, 
especially over the course of the last 15 years, has seen that for 
themselves--most dramatically in southern and eastern China. It is 
clear that economic development and contact with the West through trade 
has let a genie out of the bottle that the regime in Beijing will never 
be able to put back. We must continue to encourage that trend as we 
turn the corner to a new century.
  The whole MFN renewal issue is an outdated relic of the cold war--a 
war that's over. The Jackson-Vanik amendment, the basis for the yearly 
MFN renewal requirement, was not designed with China in mind and was 
not created as a way to better a country's overall human rights record 
or its adherence to international or bilateral trade or nuclear 
proliferation agreements. Rather, it was originally designed to 
pressure the Soviet Union to allow the free emigration of Soviet Jews 
to Israel and other countries. Over the years, its application has 
moved from covering freedom of emigration from any country with a 
command or nonmarket economy to a tool for expressing United States 
displeasure with a variety of China's sins. It is somewhat ironic that 
of all the different issues raised by Members of Congress arguing to 
revoke the PRC's MFN status, I have never heard China's emigration 
policies mentioned even once.
  With the demise of the cold war, and changing world realities, we 
would do better to repeal Jackson-Vanik and replace it with a more 
workable and pragmatic alternative. We should extend permanent MFN 
status to China, retaining of course the option of revoking that status 
should the need truly arise. That extension would remove a series of 
irritants from our relationship, but would not adversely affect our 
ability to address China's various transgressions.
  We retain a whole series of options to deal with the many areas of 
friction in our bilateral relationship that are more narrowly 
tailored--and therefore more effective--than the overkill method of MFN 
revocation. For example, a wide variety of unfair trade practices can 
be addressed through provisions of the Trade Act of 1974--commonly 
called the Special 301 provision--as with the recent intellectual 
property rights dispute. Similar legislation is in place to deal with 
nuclear or other weapons proliferation.
  I am not an apologist for the PRC--far from it. The Chinese are 
failing to honor many of their commitments to us, such as intellectual 
property rights and nuclear proliferation--note the recent well-founded 
allegations that the PRC has assisted Pakistan in building a missile 
production facility. They want to gain entry to the WTO on their own, 
not the WTO's terms. Their progress on the human rights front has been 
negligible at best, as evidenced by a rash of recent crackdowns in 
Tibet and Xinjiang. They are actively pursuing the purchase of Russian 
SS-18 ICBMs and MIRV technology. They have laid claim to the vast 
majority of the South China Sea, to the consternation of five other 
claimant countries. They have conducted a series of aggressive and 
inflammatory military exercises this year off the coast of Taiwan.

  But despite all these issues, the revocation of China's MFN status is 
not a constructive remedy. It is high time that scrap this annual 
ritual, and replace it with a more thoughtful and pragmatic approach 
that builds on our efforts, rather than tears at this important 
relationship. I was glad to see during the latest debate that 
acceptance of this position seems to be growing among Members of 
Congress.

[[Page S10405]]

  Madam President, while it is too late in this legislative year to 
take up the issue in the Congress, I hope that before we go through 
this dance again next year that Members from both sides of the aisle, 
from all the relevant committees, can sit down and formulate an 
alternative. The upcoming period after our sine die adjournment would 
be a perfect time to do so.

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