Statement of Administration Policy: H.J. Res. 502 - Disapproving the Extension of MFN to China & H.R. 5318 - United States-China Act of 1992

(House Rules) SENT to House
H.J. Res. 502: (Solomon (R) New York)
H.R. 5318: (Pease (D) Ohio and 34 others)

The Administration strongly opposes H.J. Res. 502, which would deny China most-favored-nation (MFN) trade status, and H.R. 5318, which would place additional conditions on MFN renewal. If either of these bills were presented to the President, his senior advisors would recommend a veto.

The President's decision to renew the waiver extending China's MFN status is based on the principle that engagement with China offers the best hope for democratic reform. The unconditional extension of MFN substantially promotes broader U.S. interests in human rights, nonproliferation, and trade. As noted below, the United States' record of addressing issues of concern with China has been one of considerable success.

Emigration. The Jackson-Vanik Amendment requires the President to determine whether renewal of the MFN waiver would substantially promote freedom of emigration from China. It is clear that an extension of the waiver would advance this objective. Over 18,000 Chinese citizens emigrated to the United States last year. Indeed, the principal restraint on emigration is not Chinese policy, but rather the capacity and willingness of other nations to absorb Chinese immigrants.

Nonproliferation. As a direct result of targeted Administration sanctions, China's support for global nonproliferation initiatives has increased significantly. For example, China: (1) agreed to adhere to the Missile Technology Control Regime guidelines and parameters and has acceded to the Nuclear Non- Proliferation Treaty; (2) is involved in the President's Middle East Arms Control Initiative; and (3) is participating in the Chemical Weapons Convention ln Geneva.

Trade. China is implementing reforms to improve significantly the protection of patents and copyrights, including computer software. U.S. industry has strongly endorsed these reforms and has urged continuation of MFN for China. In addition, Chinese negotiators agreed to a draft memorandum of understanding that will prohibit exports of prison labor products to the United States and will provide for U.S. inspection of suspect Chinese facilities. The United States is making every effort to conclude successfully market access talks with China by the October deadline.

Human Rights. Promotion of fundamental human rights is and will remain at the forefront of U.S. foreign policy objectives toward China. We have taken the strongest position against China's human rights abuses of any country in the world. The United States is the only nation today that has not lifted Tiananmen sanctions against China, which are specifically targeted to human rights issues. Dialogue with the Chinese on human rights has produced tangible results; more needs to be accomplished. The United States will not lift its Tiananmen-related sanctions until the Chinese make substantial progress in protecting basic human rights.

The United States-China commercial relationship has encouraged positive change and helped influence those elements of Chinese society most open to reform. To place conditions on MFN would hold the single most powerful instrument for promoting reform hostage to the reactions of hardliners in Beijing.

In this regard, conditional renewal of MFN, with the threat of revocation restricted to state enterprises, is equally unacceptable. It would have an indiscriminate impact on the entire Chinese economy. The state sector is involved in nearly all aspects of China's trade regime. State-owned foreign trade companies are responsible for exporting most of China's exports, including those from joint ventures and private enterprises in the South. Further, it would be virtually impossible to administer selective MFN, enterprise-by-enterprise; it would invite massive fraud and circumvention.

From the Chinese perspective, targeting the rescission of MFN to state enterprises would make no difference. These proposals are very likely to result in retaliation, jeopardizing a significant portion of an estimated $8 billion U.S. export market in 1992 with no identifiable gain. Such retaliation also would injure U.S. farmers, whose agricultural exports would be boycotted, and consumers, particularly the least affluent, who rely on U.S. import of China's low cost goods. Finally, U.S. businesses with joint venture and other operations in China would suffer significant economic losses.