[Congressional Record Volume 143, Number 86 (Thursday, June 19, 1997)]
[Senate]
[Pages S5954-S5955]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  MOST-FAVORED-NATION STATUS FOR CHINA

  Mr. THOMAS. Mr. President, I come to the floor today as chairman of 
the Senate Subcommittee on East Asia and Pacific Affairs to discuss and 
formally state my support for the extension this year of most-favored-
nation status to the People's Republic of China. I want to stress at 
the beginning that supporting China MFN is not an issue of approving or 
disapproving China's behavior. Rather, it is an issue of how we best 
work to influence that behavior in the future. For several reasons, I 
do not believe that withholding MFN is an effective tool in doing that.
  First, I firmly believe that invoking most-favored-nation status 
would hurt the United States more than the Chinese. It would be the 
economic equivalent of saying, ``Lift up a rock and drop it on your own 
foot.''
  Simply put, we are talking about American jobs. It is estimated that 
United States exports to China support around 200,000 American 
jobs; the Chinese purchases now account for 42 percent of our 
fertilizer exports and over 10 percent of our grain exports as well.

  Last year, China bought over $1 billion worth of civilian aircraft, 
$700 million in telecommunications equipment, $340 million in 
specialized machinery, and $270 million of heating and cooling 
equipment.
  As China's economy continues its dynamic growth, the potential market 
for increased sales, of course, will grow as well. Our withdrawal of 
MFN would certainly be met with in-kind retaliation by the Chinese, who 
are fully capable of shopping elsewhere for their imports, as we have 
seen with Boeing and Airbus, with resulting harm to America's economy.
  Second, revoking MFN would have a damaging effect on the economies of 
our close allies and trading partners Hong Kong and Taiwan. The vast 
majority of Chinese trade passes through Hong Kong. Putting the brakes 
on that trade would result in a 32 to 45 percent reduction--around $12 
billion worth--of Hong Kong's reexports from the PRC to the United 
States.
  In addition, it is estimated that there would be about a $4.4 billion 
drop in income to Hong Kong, a loss of 86,000 jobs, and a 2.8 reduction 
in GDP.
  Moreover, revoking MFN would have the greatest negative impact on the 
southern China provinces where Hong Kong and Taiwanese businesses have 
made substantial investments, as well as the United States. But I want 
to stress this point. It is in these provinces that the political and 
social changes for the better are occurring.
  Mr. President, on my last trip to China--my only trip to China--I 
traveled from Beijing in the north through Shanghai and on to Guangzhou 
in the south. In Beijing, talks with the Chinese centered solely on 
politics, Taiwan particularly. The vast majority of the population 
still ride bicycles. The availability of western goods, while 
increasing, is limited. The role of the party in the people's daily 
lives is still significant.
  But as we traveled further south, I was struck by the change in 
attitudes and interests. People were much less concerned about politics 
and ideology and much more concerned about continuing trade, their 
standard of living, as well as budding democratic freedoms. Western 
consumer goods are widely available, the minority of people ride bikes, 
and most instead drive cars and motorcycles. The party apparatus is 
much less ideologically communistic and more bureaucratic.
  In my view, there is one cause for these changes, changes in the 
everyday lives of the average Chinese citizens--commercial contacts 
with the West, especially the United States.
  Mr. President, by opening up their economy to market reforms and 
economic contacts with the rest of the world, the Chinese authorities 
have let the genie out of the bottle. If we revoke MFN, in effect 
cutting off trade with China, we only serve to retard this opening-up 
process, a process that we should be doing in every way to advance and 
encourage the advancement there.
  Third, revoking China's MFN status would place it among a small 
handful of countries to which we do not extend this normal trading 
status. Most favored nation is a bit of a misnomer. It is actually 
normal relations. But we exclude that normal relationship with Cuba, 
Laos, North Korea, Serbia, and Afghanistan. We would be relegating 
China to this grouping, and I believe it would do irreparable harm to 
our bilateral relationship and to the security and stability of East 
Asia as a whole.
  China is very attuned to the concept of face. Placing it on the same 
level as the world's most outcast nations, while perhaps not 
undeserving in some fields, would needlessly provoke a backlash from 
the Chinese which would frost over whatever strides we have made in the 
past.
  Now, I want to make it clear that I in no way condone the policies of 
the Chinese nor the actions. I am by no means an apologist for the PRC 
nor a proponent of foreign policy solely for the sake of business 
interests. No one can argue that China's actions in many fields do not 
deserve some serious response from us. The PRC has, at best, a sad, sad 
human rights record. It imprisons prodemocracy dissidents. It has done 
so in such numbers since the Tiananmen Square incident that there are 
no active dissidents. It prosecutes religious minorities, including 
Christians, focusing most harshly on the Buddhists in Tibet where it 
has closed monasteries and jailed monks and nuns. And it persecutes 
ethnic minorities, concentrating their attention recently on the 
Tibetans.
  The PRC consistently fails to live up to the terms of its trade 
agreements with us, especially in the areas of trade barriers and 
intellectual property rights. It has taken two separate agreements and 
several years to get intellectual property rights moving in the proper 
direction, but they are still not doing what they are supposed to do.
  It has made several decisions which call into question its 
commitments to preserving democracy in Hong Kong, including the most 
recent round involving the so-called Provisional Legislature. It 
ignores its commitments to some international agreements.

  So all in all, it is not a good situation. The question of course is, 
how do we best deal with that?
  Mr. President, I am the first to insist that we need to address these 
serious issues, but it is clear that our current China policy, which 
the administration characterizes as constructive engagement but has 
recently retooled as multifaceted is not up to the task. The Chinese 
will continue to walk over us as long as their actions meet with little 
or no credible repercussions.
  But while we need to make some response, it is equally clear to me 
that most favored nation is not going to solve any of these problems. 
As I have mentioned, its revocation would only cause more problems than 
it solves. Moreover, threatening MFN withdrawal has come to be hollow 
and meaningless. We know it and the Chinese know it.
  It is like watching a movie you have seen several times before; you 
know the plot, you know the actors, you

[[Page S5955]]

know their roles and the dialogue, and indeed you know the outcome all 
before the movie even starts. With each cry of wolf we make by 
threatening to withdraw most-favored-nation status and then do not, the 
credibility of an already tenuous threat declines.
  Yet, without a responsible alternative, Members of Congress are 
forced to face the Hobson's choice between voting to revoke MFN or 
doing nothing. Many, with no constructive way to vent their policy 
frustrations, choose revocation.
  I am convinced it is time to rethink the United States-China policy 
and come up with a workable way to get China to act as a responsible 
member of the international community and to live up both to the letter 
and the spirit of the agreements they have reached with us. In 
addition, I believe the United States has to be more prepared to say 
what it means and mean what it says.
  On March 22, in my subcommittee, we held a hearing on exactly this 
topic. It was the opinion of every panelist, save one, that we need a 
workable alternative to most-favored-nation as a tool of American 
foreign policy. I hope that in the next year policymakers, both in the 
Government and outside it, can recognize that the old policy has failed 
and move on to try and formulate a new one. It will not be a quick or 
simple process, but the sooner it begins the better off we will be and 
the better for the health of our bilateral relationship.
  In closing, Mr. President, let me reiterate that I strongly support 
most-favored-nation renewal. But at the same time, I equally strongly 
urge this administration to pursue a clear, more consistent and 
effective foreign policy towards China. Frankly, the latter will do 
more toward setting our countries down the path of a strong 
relationship.
  I yield the floor.
  Mr. HUTCHINSON addressed the Chair.
  The PRESIDING OFFICER. The Senator from Arkansas.
  Mr. HUTCHINSON. Mr. President, I ask unanimous consent to proceed for 
10 minutes in the morning hour.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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