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U.S. Department of State

U.S. Department of State

China and the MFN

Testimony By Peter Tarnoff, Under Secretary of State for Political Affairs, before the House International Relations Committee Subcommittee on Asia and the Pacific, Subcommittee on International Economic Policy and Trade, May 16, 1996

Chairman Bereuter, Chairman Roth, thank you for the opportunity to come before your committees today to discuss the extension of China's Most Favored Nation (MFN) trading status. This issue is of importance to our relationship with a country that will become a major regional and global power in the next century. It affects our national interests, not only in China, but in the Asian region as a whole. I would like to use my time this morning to try to put our decision on MFN into the broader context of the entire U.S.-China relationship.

Like each of the preceding administrations since normalization - both Democratic and Republican - this Administration favors the unconditional extension of China's MFN status. The long-term objective of our policy is to enhance the security and prosperity of the American people by encouraging China's integration into the world community, thereby fostering China's adherence to internationally-recognized norms and standards of behavior. China is at a critical juncture. The manner in which we and others engage China will help determine whether it is a constructive force in Asia and the world or follows a more worrisome and perhaps destabilizing path.

I would like to begin by outlining the two principal reasons why we oppose revocation or the imposition of conditions on China's MFN status.

First, we have practical objections to such actions. MFN is a blunt instrument. We have better tools for getting the job done in each area of our bilateral relations with China.

Second, the withdrawal of MFN, by breaking bilateral economic ties, would undermine our ability to pursue our full range of interests in China. Our economic and commercial relations increase China's stake in cooperating with us and complying with international norms. Maintaining those relations promotes progress on the wide range of issues that we care about.

Relying on the other policy tools available to us, we have tailored our responses to China's behavior for maximum effectiveness. For example:

-- On Taiwan, we have demonstrated resolve when appropriate. At the same time, we have engaged both sides through diplomatic channels to encourage restraint and an improved cross-strait dialogue.

-- On non-proliferation, we have made clear our determination to fully implement our laws and to respond forcefully to irresponsible behavior. At the same time, we have obtained important new public Chinese commitments through active consultations.

-- On human rights, we have kept faith with our principles by promoting appropriate resolutions in the UN Human Rights Commission and by using every opportunity to voice our concerns bilaterally. At the same time, we have encouraged economic, social and other exchanges, which help to build momentum for long-term progress within China.

-- On enforcement of intellectual property rights and other trade issues, we have left no doubt about the serious consequences of failing to comply with bilateral commitments and remedying chronic problems. At the same time, we have gone the extra mile to provide constructive technical advice and in other ways foster China's integration into the international economy.

We seek to keep open as many channels as possible for policy dialogue, strategic and military consultations, business and commerce, scientific and technical cooperation, and other forms of political, economic and social engagement with China. MFN is part of the foundation upon which this broad range of bilateral engagement rests. It provides the access we need to help ensure that China's growing influence on world affairs will be on terms that are consistent with our national interests.

Of course, our desire to maintain open channels of communication does not mean that we expect our exchanges with China will always be harmonious. We should not lose sight of the fact that there are many areas where our interests coincide. Where that is the case, the Administration seeks to take advantage of the benefits to both sides of continued cooperation. Unfortunately, however, there are also a number of areas in which we have significant differences. In those cases, we seek, through engagement, to remain a constructive force for progress and change.

The Administration disagrees with many of China's policies. Where this is the case, we need a variety of tools protect our interests and encourage China to choose a different path. In areas where China does not adhere to internationally-recognized norms, our determination to achieve meaningful progress -- backed, if necessary, with measures that reflect the importance of the issues in question -- is often the best way of building a stable, productive and mutually-beneficial long-term bilateral relationship. We are convinced that the laws and policies we already have in place give us the tools we need to promote greater enforcement of intellectual property rights, respect for human rights, and adherence to non-proliferation objectives.

We hold firmly to the conviction that U.S. interests are best served by the emergence of a strong, stable, open and prosperous China. We are confident that China's integration into the international community, based in part on extensive engagement with the U.S., will promote adherence to the international standards that are so vital to U.S. national interests and to the security, stability and prosperity of the international community as a whole.

The U.S. does not and should not adopt a policy of containment toward China. We would gain nothing and risk much if China were to become isolated and unstable. Who could seriously contend that China, in such circumstances, would be more likely to respond positively to our concerns in areas such as trade, human rights, or non-proliferation. Clearly, it would not.

On the other hand, our policy of facilitating China's integration into the international community -- by means of comprehensive engagement -- has produced significant benefits for us.

National Security and Non-Proliferation

The Administration's record demonstrates the advantages of a continuing dialogue with China on non-proliferation and other national security interests. Recently, extensive discussions with China over the transfer of ring magnets to Pakistan's nuclear program led to China's public commitment not to assist unsafeguarded nuclear facilities -- including no future ring magnet shipments. It also produced agreement to continue consultations on export control policies and related issues. These consultations will help develop a common understanding on building effective export control policies and practices, and strengthen national export control systems.

Earlier in this Administration, China formally committed to end all exports of ground-to-ground missiles covered by the Missile Technology Control Regime. Last year, China supported our efforts to secure the indefinite and unconditional extension of the Non-Proliferation Treaty (NPT).

China's cooperation was instrumental in resolving the crisis over North Korean violations of nuclear safeguards commitments. It was also essential in stopping support for the Khmer Rouge and building peace and stability in Cambodia.

Impact on Taiwan and Hong Kong

Our overall policy toward the PRC and our decision on MFN must take into account the potential impact on our security and other interests in the nations and territories surrounding China. During his visit to Washington last week, Hong Kong Governor Chris Patten explained very eloquently the tremendous implications of our MFN decision for Hong Kong. Withdrawal of the PRC's MFN status would also severely compromise our ability to contribute to Hong Kong's smooth reversion to Chinese sovereignty.

It would have similar negative consequences for our interests in maintaining peaceful and stable relations between the PRC and Taiwan. As we saw in March, this relationship can be volatile. Beijing's commitment to seek reunification with Taiwan by peaceful means is the foundation of our bilateral understanding with the PRC on the Taiwan question. To ensure that our substantial interests in Taiwan are preserved, we must remain engaged on both sides of the strait. The loss of our channels of communication with Beijing on this issue would be dangerous.

Jobs and Income

President Clinton stated at the beginning of his current term that the creation of quality American jobs is among his Administration's highest priorities. This remains his objective today. We conservatively estimate that U.S. exports to China provided jobs for more than 170 thousand American workers last year and are likely to create another 35 thousand or more new job opportunities in 1996.

This is only a beginning. As Stu Eizenstat will explain in more detail, the vast potential of the Chinese market is still limited by trade barriers and the lack of a transparent and effective rule of law. The Administration continues to engage China in areas of critical importance to us and is prepared to defend our commercial interests forcefully. We are confident that, by remaining engaged and by relying, when necessary, on the tools provided in our existing trade laws, we will continue to make progress in opening up the Chinese market.

The creation of jobs and income, of course, is not our only foreign policy interest. But we, as public officials, must be certain of the effectiveness of our proposed actions -- particularly when the consequences are as great as with the potential withdrawal of China's MFN status -- before we put at risk the welfare and livelihoods of so many of our fellow citizens.

Chinese Reforms and Human Rights

Commercial engagement and our efforts to facilitate China's integration into the global economic system have other important long-term benefits for the U.S. China's growing openness to international business activities helps to pull its entire society into the international community, promoting openness elsewhere in the society.

In today's world, economic integration requires a continuous flow of information and ideas. Modern communications foster the spread not only of economic data, but also of diverse viewpoints and the awareness of shared interests. While China's central authorities may wish to control some forms of communication, they will discover that their own commercial interests, which need real-time information to compete, will be the strongest opponents of censorship.

This process is at work in China. Market-oriented reforms have raised standards of living for literally hundreds of millions of Chinese people and have brought them into closer touch with each other and with foreign attitudes and perspectives. Legal reforms, including China's recent adoption of criminal procedures that give greater protection to the rights of the accused, are new steps toward the development of a transparent and effective rule of law.

From an American perspective, the changes of the last few years may appear limited and slow. From the Chinese point of view, however, they represent a dramatic departure from the past. Most important, they create expectations for further progress and a momentum of reform that, in the long-term, may be irreversible.

At present, however, Beijing's poor human rights record deserves -- and receives -- our continued condemnation. Despite greater economic freedoms and official tolerance for more open social and cultural discourse, the government treats as criminals any who express views that are perceived to threaten the legitimacy of the Communist Party's claim to exclusive political power. Dissidents often serve long sentences in the "reform through labor" and "reeducation through labor" systems. This persecution by a government of its own law-abiding citizens, while certainly not unique internationally, is abhorrent to the global community. It deserves -- and will receive -- our continued condemnation. This Administration continues to use every opportunity to press Beijing to adhere to internationally-recognized standards of behavior on all human rights issues.

Why Engagement?

The Administration strategy of engagement is based on a long-term Administration strategy for dealing with all the vitally important issues that constitute Sino-American relations. Our policy of facilitating China's integration into the world community through engagement protects the tangible short-term benefits of the relationship while promoting other important objectives that are only achievable through measured long-term efforts.

MFN is Normal

Before I conclude, I would like to add one general point about "Most Favored Nation" trading status. As the members of the subcommittees are well aware, MFN trading status -- contrary to its name -- does not provide any special treatment and is not a reward for good behavior. Currently, the U.S. offers MFN to all but a handful of our more than 200 international trading partners. The signatories to NAFTA and our other regional trade accords receive even better treatment in the U.S. market. China gives MFN treatment to U.S. goods under the terms of our 1979 Bilateral Trade Treaty.

Conclusion

Chairman Bereuter, Chairman Roth, the withdrawal of China's MFN status is not in the interests of the U.S. It is simply not the right tool for the job at hand. MFN withdrawal would not help to protect the rights and freedoms of Chinese dissidents. It would not promote China's adherence to international standards -- whether on trade or non-proliferation issues -- and it would not enhance the security and stability of Hong Kong or Taiwan.

On the other hand, MFN withdrawal would deny real jobs to U.S. workers -- jobs that would quickly move to the economies our international competitors. It would set back the process of openness and reform in China, causing the greatest harm to those who we most wish to support and encourage. It would severely hamper our ability to work with one of the world's most powerful nations on the broad range of U.S. foreign policy interests. In sum, it would do much more damage than good.

This Administration does not intend to downplay or apologize for the shortcomings of many of China's policies. We favor MFN extension not because it is good for China, but because it is good for the U.S. The stakes are high -- for us, for China, and for our other partners in Asia and around the world. Neither we nor the Chinese can afford to walk away from our responsibility to manage our differences in a way that promotes the long-term prosperity and stability of our two nations, and of the regional and global community as a whole.

Thank you.

[end of document]


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