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HJR 121 -- 07/22/98

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Office of Management and Budget


July 22, 1998

H.J.Res. 121 - Disapproving the Extension
of Nondiscriminatory Trade Treatment to China

(Solomon (R) NY)

The Administration strongly opposes H.J.Res. 121, which would disapprove normal trade relations (NTR) with China. Renewing nondiscriminatory trade treatment, previously known as most-favored-nation (MFN) treatment, does not give China a special deal. It simply extends to China the ordinary tariff treatment the United States extends to virtually all nations. The Administration urges the Congress to defeat H.J.Res. 121 for the reasons explained below.

The Administration urges support for the renewal of NTR to China because it advances critical U.S. interests. Maintaining our overall relationship with China will enable the United States to actively engage China in the months and years ahead, to enhance areas of cooperation, and to pursue American interests where we differ. That engagement can help determine whether China becomes an increasingly open and productive partner for America, or whether it becomes more isolated and unpredictable. Extending NTR status to China is vital to our ability to successfully engage China and advance U.S. interests.

Engagement has resulted in significant progress in areas important to U.S. national interests -- i.e., economic and regional stability in Asia, preventing the spread of weapons of mass destruction, combatting international crime and drug trafficking, and protecting the global environment. China has agreed to end nuclear cooperation with Iran. China has condemned both India and Pakistan's nuclear testing and has agreed to work towards preventing an arms race in South Asia. China has helped the United States to convince North Korea to freeze its nuclear program and is playing a role in the Korean peace talks. China has also played a constructive role in responding to the Asian financial crisis, in part by maintaining its exchange rate. At the recent summit, China agreed not to target nuclear weapons at the United States and to actively study joining the Missile Technology Control Regime. China, through engagement, is increasingly moving from being part of the proliferation problem to being part of the solution. The United States continues to maintain strong unofficial relations with Taiwan, including arms sales, based on the Taiwan Relations Act. The Administration has welcomed Hong Kong's smooth transition to Chinese sovereignty during which its high degree of autonomy and the human rights of its residents have been protected.

H.J.Res. 121 would also undermine America's economic interests. U.S. exports to China and Hong Kong support an estimated 400,000 American jobs. Chinese retaliation would imperil or eliminate these jobs, exclude American companies and workers from future business in one of the world's most dynamic markets, and give an open field to European and Asian competitors. Denial of NTR would also hurt U.S. consumers, who because of higher tariffs could pay as much as $590 million more each year for goods such as shoes, clothing, and small appliances. Goods manufactured with Chinese components would also increase in cost, thereby, reducing the competitiveness of U.S. goods domestically and internationally.

Engagement allows the Administration to deal forthrightly with our differences, including human rights and universal principles of freedom and democracy. The President during his recent visit to China made the case not only to the Chinese leadership but directly to the Chinese people that human rights are universal and that human freedom is indispensable to a country's stability and progress. Engagement with China is the best way to advance these U.S. ideals. This approach has produced results, although more needs to be accomplished. These results include: the release of several prominent political prisoners; agreement to sign the UN Covenant on Civil and Political Rights; hosting visits of U.S. religious leaders and the UN Working Group on Arbitrary Detention; and substantial cooperation with the United States on the rule of law. Over time, the more the United States brings China into the world, the more the world will help bring freedom to China.

Renewal of NTR best advances the substantial U.S. interests that are at stake. Revoking NTR would significantly damage the U.S. relationship with a fourth of the world's population. It would effectively sever our economic relationship with China, undermining our capacity to influence China in a broad range of areas. It would reverse three decades of bipartisan China policy and would seriously weaken our influence not only in China, but throughout Asia. The withdrawal of China's NTR status would prevent further progress on these and other important issues.

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