June 4, 1999

President Clinton will renew most favored nation status for China. The President argued that normal trade relations benefits Americans and to advocate "disengagement and confrontation" would play into the hands of those in China opposed to "greater openness and freedom." Congress has 90 days to overturn the decision.

MFN for China has been maintained by every President since 1980. Clinton said normal trade relations "will promote America's economic and security interests. U.S. exports to China have quadrupled over the past decade. Revoking MFN, as Congress can do, "would derail ongoing negotiations to increase our access to China's market and to promote economic reforms there," Clinton said.

He also said he was willing to work with Congress to secure permanent MFN status for China "in the context of a commercially strong (World Trade Organization) agreement." But he emphasized that the administration's "eyes (are) wide open" and there are no illusions about the extent of engagement.

Normal trade relations, or MFN status, gives China the same low tariffs in U.S. markets for its exports as virtually every other country in the world. However, a major issue on Capitol Hill will be a report on Chinese spying from a House committee headed by Rep. Christopher Cox (R-CA). REUTERS quotes Under Secretary of State Stuart Eizenstat saying the Cox report "obviously creates a difficult context."

Another complicating factor is the NATO bombing of the Chinese embassy in Belgrade, Yugoslavia, and China's opposition to NATO's campaign in Yugoslavia. There have been no WTO negotiations with China since the bombing and none are scheduled.

Labor unions oppose NTR for China, but business groups favor it. It is expected that Congress will not ultimately overturn Clinton's decision.

The KYODO NEWS SERVICE reports that the Hong Kong government and U.S. Chamber of Commerce welcomed the decision. "The decision is conducive to boosting our business confidence," the government said in a statement.

Jason Felton, head of the chamber in Hong Kong, said renewal without conditions is necessary for a constructive U.S.-China relationship, regional stability and recovery that also involves Hong Kong.