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U.S. Department of State

Winston Lord: China's MFN Status

Statement of Ambassador Winston Lord, Assistant Secretary of State, Bureau of East Asian and Pacific Affairs, before the House Ways and Means Committee, Trade Subcommittee, June 11, 1996.

Released on the Web by the Bureau of Public Affairs
June 12, 1996

Thank you very much for the opportunity to testify before this committee on the extension of China's Most Favored Nation (MFN) trading status. This issue is of critical importance to our relationship with a country that is fast becoming a major regional and global power. It has great significance for our national interests. I would like to use my time this morning to put the MFN decision into the broader context of overall U.S.-China relations.

Since we normalized relations with China in 1979, every U.S. administration--Democratic and Republican--has extended China's MFN trading status. This Administration supports the continuation of that well-established policy.

As President Clinton said when he confirmed his commitment to this policy two weeks ago: "MFN renewal is not a referendum on all China's policies." It does not constitute an endorsement of any specific action or behavior. The decisions of President Carter, President Reagan, and President Bush to extend MFN did not indicate their approval of Chinese repression or behavior. Their decisions were based on a balanced assessment of U.S. interests and the best means of pursuing those interests. The same considerations apply today.

Unfortunately, a number of myths and misunderstandings have muddled our discussions on China's MFN status.

First of all, the term "Most Favored Nation," in itself, contributes to the confusion. Contrary to the way it sounds, MFN does not provide any preferential or special treatment and is clearly not a reward for good behavior. Rather, it is the normal commercial foundation upon which our relations with all but a handful of our international trading partners rest. It is also the basis of multilateral consensus and support for a free and open global economic system.

As Congressman Bereuter recently noted, we have not withdrawn Nigeria's MFN status because its current regime has executed poets and other political dissidents. Products from Syria and the Sudan receive MFN treatment, despite their governments' support for international terrorism.

The extension of this status in these cases, of course, does not mean that we do not consider human rights abuses, support for terrorism, or IPR piracy to be serious problems. However, MFN withdrawal is clearly not the best way to deal with such issues. In each case, we have more appropriate and more effective foreign policy tools at our disposal.

This is also true in our relations with China. Relying on the instruments already available, we have tailored our responses to China's behavior for maximum effectiveness. These instruments provide both positive and negative inducements for Beijing to address our concerns. For example:

More recently, this firm stance was critical to our ability to obtain China's commitment that it "will not provide assistance to unsafeguarded nuclear facilities" in third countries, including Pakistan. This is a new and significant public commitment by China. It goes beyond earlier Chinese commitments by accepting responsibility not only to control nuclear items specifically listed on the international trigger lists, but also dual-use items, including ring magnets, and other forms of assistance to unsafeguarded nuclear facilities. It is an important step forward.

At the same time, Chinese society is opening up, and its increasing integration into the international community will be a long-term process. The creation of an increasing network of economic, educational, cultural, technical, and legal ties between Chinese citizens and the outside world will help foster a positive climate in China for human rights. We are pursuing both governmental and non-governmental dialogue with China on issues related to the rule of law. Over time, this engagement, too, will have a significant effect.

A second myth that exists in some quarters is that whenever there are difficulties in our relationship with China, it must be due to U.S. miscues. Clearly, the U.S. is not responsible for political insecurities that lead Beijing to imprison dissidents. Clearly, our policy did not cause Beijing to launch missiles into the Taiwan Strait, to export dangerous technologies, or to fail to open markets and enforce intellectual property rights.

The reality is that, no matter how wise and steady our course, we will continue to encounter problems as well as opportunities in our bilateral relations with China. Moreover, during this period, we are dealing with a complex, difficult and prickly partner whose power is growing, whose leadership is in transition, and whose government is turning increasingly to a nationalism that is conditioned by thousands of years of experience as the dominant "Middle Kingdom" and more than a century of humiliation by foreigners. Against this backdrop, any Administration, any policy would encounter tensions. It is inevitable that two great nations--with different histories, cultures, and stages of development--will have differences.

A third myth is that America should respond to our differences with China by seeking to control or contain it. Such a policy would be misguided and, in the end, unsuccessful. It would constitute a self-fulfilling prophesy of turning China into an enemy. It would require a major shift in our economic, military and diplomatic resources. We and the global community would risk much if China were to become weak, isolated and unstable. Who could seriously contend that China, in such circumstances, would be more likely to respond positively to our concerns in such areas as regional security, arms control, trade and human rights? As Secretary Christopher said recently, "A more secure China is likely to be more open to reform and a better neighbor."

In practical terms, a containment policy would require the support and cooperation of Europe, Russia, Japan, Korea, and others in the region. Whatever the degree of their concern about China's growing power, no country would be willing to join in efforts to contain the PRC. And if we attempted to pursue such a policy alone, we would not only lose our ability to influence China in ways that promote our interests. We would also lose the benefits of cooperation on trade and other commercial issues, on North Korea, non-proliferation, UN Security Council actions and other international security issues and on global issues like the environment, narcotics trafficking and international crime. We would also severely strain our relations with our many friends and allies in Asia and elsewhere, and could potentially destabilize the entire region.

A fourth myth, suggested by some of those who advocate containment, is that the only alternative is appeasement. Consistent with the approach of five previous administrations of both political parties, this Administration's policy of pursuing U.S. interests through engagement with China in no way implies acquiescence in Chinese actions that clash with U.S. interests or international norms. As I explained earlier, engagement allows us to tailor our responses to the specific circumstances in each area where we have differences with China. It makes it possible for us to apply a wide range of inducements and pressures on issues where we wish to encourage China to adjust its course. Engagement means being firm whenever necessary, and cooperative whenever possible.

Where China does not comply with its international commitments or with internationally-recognized standards of behavior, we are prepared to use all the instruments at our disposal, including those provided for in existing domestic legislation, that may be required to promote progress. Our willingness to take a firm stance when necessary is required to protect our interests, maintain domestic support for engagement, and engender respect in Beijing. It is an important component of building a stable, productive and mutually-beneficial long-term relationship.

At the same time, engagement allows us to continue to enjoy the substantial benefits of a constructive and cooperative bilateral relationship with China. In the midst of the inevitable frictions and media attention, let us not lose sight of these positive elements.

The benefits of engagement with China are not limited, as is sometimes implied, to the economic and commercial sphere. China, in its own self-interest, has cooperated with us in managing dangerous North Korean behavior. It has cut off aid to the Khmer Rouge and supported the elected government in Cambodia. Though sometimes exerting its influence, China has not vetoed United Nations actions of critical importance to the international community. It has cooperated with us in such areas as narcotics trafficking and alien smuggling.

Despite serious continuing problems, China has come a long way in the last decade on non-proliferation and arms control issues. It has joined the Non-Proliferation Treaty (NPT) and the Chemical Weapons Convention and has supported rapid conclusion of the Comprehensive Test Ban Treaty (CTBT). In 1994, after we had imposed sanctions related to Chinese sales of missile equipment to Pakistan, China agreed not to export ground-to-ground MTCR-class missiles. More recently, we have obtained China's commitment not to assist any unsafeguarded nuclear facilities.

On the economic side, despite some substantial disputes, China has been our fastest growing export market in recent years. Last year alone, our exports increased by more than one-fourth, supporting nearly 170,000 American jobs. Based on sales in the first quarter of this year, we may do nearly as well this year--creating another 35,000 or more new jobs.

With one of the world's highest economic growth rates, China offers enormous commercial opportunities for U.S. business. To take just one example, by the year 2000, China is expected to invest over $150 billion in electric power production and distribution, transportation, telecommunications and other major commercial and infrastructure projects. If allowed to compete on a level playing field, U.S. companies can expect to win a significant portion of the related international contracts. But if our producers are handicapped in this key market, European, Japanese and other international competitors are ready and able to take their place.

Commercial concerns, of course, are only one of our foreign policy interests. But we must be very sure of the effectiveness of our proposed actions before we put at risk the livelihoods of so many American citizens.

Given the stakes involved, the extension of China's MFN status is a precondition of engagement--both where we seek changes in Chinese behavior and where our interests and policies coincide. An examination of the negative consequences of MFN withdrawal for U.S. interests offers a compelling case for our policy approach.

On the one hand, MFN withdrawal would NOT accomplish our goals:

On the other hand, MFN withdrawal would inflict great damage on a range of important U.S. interests:

This Administration will not downplay or ignore our problems with China's policies or behavior. We support unconditional MFN extension not as a favor for China, but because it is good for America. The stakes are high--for us and for China, for stability and prosperity in Asia and the world. We must manage our differences with China in a way that promotes our interests. China, in turn, must make its own efforts on behalf of a relationship that will be central to both countries' welfare in the twenty-first century.

Mr. Chairman, in the last two weeks, President Clinton and Secretary Christopher have set forth our comprehensive policy toward China. In this context, they have reaffirmed their strong conviction that U.S. national interests require the unconditional extension of China's MFN status. This judgement is consistent with the policies of previous administrations and with the advice of political leaders and foreign policy experts of both parties. As President Clinton has noted, a vote for MFN renewal is a vote for American interests. I look forward to working with you and with the rest of the Congress to build the political consensus that is required for us to steer a steady course during this difficult period in U.S.-China relations.

Thank you.

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Last Updated: June 12, 1996