Most-Favored-Nation Status of the People's Republic of China
Released: 2001-07-25T00:00:00

China's Most-Favored-Nation Status

In the context of the controversy surrounding the renewal of China's most-favored-nation (MFN) status (1) or its permanent grant, it should be pointed out thathistorically the specific MFN issue involved is that of tariffs rather than of the general MFN treatment as envisagedby the General Agreement on Tariffs andTrade or the bilateral commercial compacts to which the United States is a party. Thus, the MFN status incontroversy and, consequently, discussed in this reportis limited to nondiscriminatory tariff treatment of China; that is, the application to imports from China of the sameconcessional customs duty rates agreed to bythe United States in reciprocal negotiations with other trading partners.

The United States has applied such MFN tariff treatment as a matter of statutory policy, enacted in 1934, generally to all of its trading partners. This policy wasmodified with the enactment of Section 5 of the Trade Agreements Extension Act of 1951 (P.L. 82-50), whichrequired the President to suspend MFN tarifftreatment of the Soviet Union and all countries of the then Sino-Soviet bloc. Under this statutory mandate, PresidentTruman suspended China'smost-favored-nation tariff status as of September 1, 1951. After China's occupation of Tibet, that country's MFNstatus also was suspended as of July 14, 1952. Whereas earlier the MFN status could, under certain conditions, be restored to a suspended country by presidentialaction, such restoration could take place, sinceOctober 1962, only by specific law, until the Trade Act of 1974, in Title IV, provided specific authority and set outthe conditions and the procedure for itstemporary restoration to "nonmarket economy" (NME) countries and its subsequent continuation in effect.

Under Title IV, the key elements of the procedure for temporary restoration of the MFN status to an NME country (2) are (1) conclusion of a bilateraltradeagreement containing a reciprocal grant of the MFN status and additional provisions required by law, and approvedby the enactment of a joint resolution; and (2)compliance with the freedom-of-emigration requirements ("Jackson-Vanik amendment;" Section 402; 19 U.S.C.2432). These requirements can be fulfilled eitherby a presidential determination that the country in question places no obstacles to free emigration of its citizens, or,under specified conditions, by a presidentialwaiver of such full compliance.

In accordance with this procedure, the President, on October 23, 1979, transmitted to Congress the trade agreement with China, signed on July 7, 1979, itsproclamation (Pres. Proc. 4697; 44 F.R. 61161), and the executive order (E.O. 12167; 44 F.R. 61167) granting toChina the Jackson-Vanik waiver (H.Doc.96-209). The agreement was approved by Congress on January 24, 1980 (H.Con.Res. 204, 96th Congress) andentered into force on February 1, 1980(together with the reciprocal grant of the MFN status, which it contains in addition to all other provisions requiredby Section 405(b) of the Trade Act of 1974; 19U.S.C. 2435(b)).

The continuation in force of China's (or any other NME country's) MFN status is contingent on (1) triennial extensions of the underlying trade agreement and(2) continued compliance with the Jackson-Vanik amendment, the latter in the case of two NME countries,including China, by means of annual renewals of thewaiver authority and existing waivers.

The agreement, concluded for a 3-year initial term, itself provides for automatic 3-year extensions, but is subject to termination by either party upon notice at least30 days before the expiration of any 3-year term. The continuation in force of the agreement is also subject to therequirement in Section 405(b)(1)(B) of the TradeAct of 1974 (19 U.S.C. 2435(b)(1)(B)), which applies to any trade agreement concluded under Title IV with anNME. Under that provision, the agreement isrenewed triennially if a satisfactory balance of concessions has been maintained during the life of the agreement andthe President determines "that actual andforeseeable reductions in United States tariff and nontariff barriers ... resulting from multilateral negotiations [whichbenefit China unilaterally because of its MFNstatus] are satisfactorily reciprocated by [China]." Such determination has thus far been published six times, mostrecently as Presidential Determination No.98-14 of January 30, 1998 (63 F.R. 5857), extending the agreement through January 31, 2001. (3)

To remain in force, the Jackson-Vanik overall waiver authority as well as the specific China waiver (and China's most-favored-nation tariff status, which iscontingent on it) at present must be renewed annually. The renewal procedure entails (1) a President'srecommendation, which must be made by June 3 of everyyear, that the existing waiver authority and individual waivers be extended for another 12-month period (throughJuly 2 of the following year). Such extension is(2) automatic upon the President's recommendation unless it is disapproved by the enactment of a joint resolution(before 1990, adoption of a one-houseresolution).

The language of the disapproval resolution is prescribed by law, and a specific fast-track procedure is provided for its consideration. In its basic legislative steps,the resolution must be reported within 30 calendar days (or else the committee considering it may be discharged),may be amended only with respect to thecountry (or countries) to which it applies, and the debate on it is limited in either chamber to 20 hours, dividedequally between those favoring it and thoseopposing it. The resolution must be approved by August 31. A presidential veto of the resolution must beoverridden by the August 31 deadline or within 15 daysof session after Congress has received the veto message, whichever is later. (4) If the resolution is enacted, the waiver and the MFN status cease to beeffective onthe 61st day after its enactment.

Particularly in recent years, congressional opposition to the continuation in force of China's MFN status has increased on various grounds, mostly unrelated to thefreedom-of-emigration considerations. Despite this opposition, legislative action to disapprove its annual extensionshas, thus far, been consistently unsuccessfuland China's waiver and MFN status have remained in force. Moreover, the controversy in Congress has recentlyundergone a decided shift of its focus from theissue of whether to continue in force China's MFN status under the provisions of Title IV to the opposite one ofgranting such status to China unconditionally andpermanently.

In a related side issue, the opposition to the application of MFN treatment to imports from China among the public at large has been in some part caused by anobvious misunderstanding of the term "most-favored-nation treatment" itself, taking it in its literal meaning.Congress, primarily prompted by thismisunderstanding with respect to China, consequently, enacted legislation (Section 5003 of the Internal RevenueRestructuring and Reform Act of 1998 ( P.L.105-206 )) replacing the misleading term in all seven instances of the then existing and in any future statutes withthe term "normal trade relations" (NTR) oranother appropriate term. (5)

Withdrawing or Restricting China's MFN Status

As long as China remains subject to the Title IV regime (see footnote 2), MFN status could be withdrawn fromChina, either permanently or temporarily, in one ofseveral ways: (1) by direct legislation enacted through regular legislative process (6) ; (2) by using the specific means provided in the Trade Act of 1974 for denyingMFN tariff status to a NME country that had it restored under that law, i.e., by the specific fast-track enactment ofa joint resolution disapproving the mid-yearannual renewal of the Jackson-Vanik waiver authority with respect to China, if such renewal is recommended bythe President; (3) by the President's failure torecommend such renewal with respect to China in the first place, for noncompliance with the Jackson-Vanikrequirements; or (4) by direct action by the Presidentsuspending or withdrawing China's MFN status. China also could lose its MFN status if the agreement is terminated,upon notice, at the end of a term, or,presumably, if the 3-year extension of the U.S.-China trade agreement in force does not take place because thePresident declines or omits to make the requireddetermination. (7)

In past years, Congress has repeatedly and consistently attempted to terminate or restrict China's MFN status by means of resolutions disapproving the annualextension of China's waiver or by specific legislation, or subject its continuation in force to additional statutoryconditions, primarily in the area of human rights. None of these measures has become law, although two of them (one in either session of the 102nd Congress), settingadditional conditions for the annualextensions of MFN status, came close to being enacted: passed by both houses, they were vetoed by the Presidentand the veto was upheld by the Senate.

A special situation arose in mid-1993, when the President extended China's waiver for another year, but at the same time in Executive Order 12850 also setspecific additional conditions for the mid-1994 extension of China's waiver and MFN tariff status. These conditionsclosely reflected those set in the severalversions of the United States-China Act of 1993 (103rd Congress) and, in addition to compliance withthe Jackson-Vanik amendment, mandated compliance withthe 1992 U.S.-China prison labor agreement and significant progress with respect to China's adherence to theUniversal Declaration of Human Rights, release ofand accounting for Chinese citizens imprisoned or detained for the nonviolent expression of political and religiousbeliefs, ensuring humane treatment of prisonersby allowing access to prisons by international humanitarian and human rights organizations, protecting Tibet'sreligious and cultural heritage, and permittinginternational radio and TV broadcasts into China. The E.O. also charged U.S. officials to pursue resolutely actionsto ensure that China keeps its commitments tofollow fair, nondiscriminatory trade practices in dealing with U.S. businesses, and adheres to the NuclearNon-Proliferation Treaty, the Missile TechnologyControl Regime guidelines, and other nonproliferation commitments.

Although China denounced the action taken by the President, the principal sponsors in both houses of the legislation to subject the 1994 extension of China'sMFN status to additional conditions (Representative Pelosi and Senator Mitchell) expressed their satisfaction withthe President's action as representing asufficient step and stated that further congressional action on their respective bills would be unnecessary. Thelinking of China's MFN status to overall humanrights, however, was abandoned in mid-1994 when President Clinton renewed the China waiver taking into accountonly its statutory condition, namely,compliance with the freedom-of-emigration requirement of the Jackson-Vanik amendment. Subsequent legislativemeasures to disapprove the renewal or subjectit again to broader human rights conditions failed.

In both sessions of the 104th Congress, the joint resolutions disapproving the presidential extensions of China's MFN status through the renewals of theJackson-Vanik waiver failed of passage. Likewise, no action was taken on several other bills, such as one nullifyingChina's waiver and subjecting its restorationto enactment by regular procedure; or another, conditioning the continuation of China's waiver on Taiwan's speedyadmission to the World Trade Organization(WTO); or one assessing additional tariffs on imports from China until the President determines that China is fullyimplementing the agreement on the protectionof American intellectual property rights in China.

In the 105th Congress, joint resolutions disapproving the mid-year renewals of the waiver authority were introduced in both sessions but failed to be enacted,allowing the extension of the waiver and China's MFN status to remain in force through July 2, 1999. No specificlegislation was introduced to withdrawaltogether China's MFN status; such action, however, was proposed with respect to goods produced or exported bythe People's Liberation Army or a Chinesemilitary company, but not further considered. China's MFN status also would have been impaired by a bill whichrequired quarterly adjustments of U.S. tariffs onimports from China based on the amount by which China's tariffs on exports from the United States exceed U.S.tariffs on imports from China.

China's MFN status with the United States also could have been adversely affected by legislation, introduced but not passed, requiring prior congressionalapproval of U.S. support of China's admission to the WTO and the withdrawal of the United States from the WTOif China were to be admitted without U.S.support.

In January 1998, the President also published the determination renewing the 1979 trade agreement with China for three years through January 31, 2001 (see p. 2).

In the 106th Congress, congressional action regarding China's MFN status --other than two failed annual attempts to disapprove the Presidents renewal of China'sfreedom-of emigration waiver--as in the preceding Congress, reflected to some extent the current action for China'sadmission to the WTO. Fourmeasures--which would have had only indirect adverse effect on China's NTR status--were introduced (but notpassed) to prohibit U.S. support of China'sadmission unless approved by legislation. Three of the four measures also required the United States to withdrawfrom the WTO if China were to be admittedwithout the U.S. support. Lack of U.S. support, however, would have had no practical consequences, since it couldnot prevent China's admission. United States'withdrawal from the WTO, on the other hand, would have had not only serious consequences for U.S.-China traderelations but even more serious consequencesfor the United States' leading role in overall international trade relations.

China's admission to the WTO would have played a more direct role the U.S. MFN policy toward China through the "snap-back" provision of the proposedChina Market Access and Export Opportunities Act of 1999. Under the provision, current U.S. duty rates on importsfrom China would be increased to thepre-Uruguay Round levels if China were not according adequate trade benefits to the United States or takingadequate steps toward becoming a WTO member.Lower duty rates would be

restored if the relevant contingency were reversed.

Reasons for and Effects of Withdrawing China's MFN Status (8)

In the context of the Jackson-Vanik amendment and Title IV procedure, the sole statutory criterion forcontinuing in force or withdrawing China's MFN status atpresent is China's compliance with the freedom-of-emigration requirements--a criterion that in presentcircumstances no longer represents a practical obstacle toMFN treatment of China by the United States. The advocates of denying MFN status to China, however, have gonebeyond the narrow scope of thefreedom-of-emigration issue and have based their opposition to continued MFN status on China's violation of humanrights in general, its unfair trade practicesand obstacles to market access, lack of legal and regulatory transparency, the large and growing U.S. trade deficitwith China, China's uncooperative attitude inweapons and nuclear nonproliferation, and, more recently, the alleged illegal Chinese donations to the DemocraticNational Committee, or nuclear espionage.

Supporters of MFN treatment of China, among them the Administration, have taken the position that the resolution of these issues ought to be pursued throughconsultations and negotiations in other fora, or by other appropriate means. Particularly the structural trade andeconomic issues involved, they suggest, wouldbest be resolved in the still ongoing negotiations for China's accession to the World Trade Organization. In the viewof the supporters of China's continued MFNstatus, its withdrawal would be counterproductive since it would increase friction and be less conducive to resolutionof any problems through dialogue. It would,they assert, particularly in the human rights area, possibly exacerbate the situation, in addition to the adverseeconomic consequences it would engender.

Economic consequences would be considerable. Withdrawal of China's MFN status would result, in the first instance, in significant duty increases on about 95%of U.S. imports from China, totaling $99,580.5 million in 2000. The cost effect of the increases would vary amongthe various product groups, but would on thewhole be substantial.

Table 1 illustrates how the withdrawal of the MFN tariff status would change the duty rates assessable in 2001 on 15 major products or product groups importedfrom China.

Table 1. Illustrative MFN and Full-Duty Rates Applicable in 2001 to Major Imports from China

In view of the overall substantial differences between the concessional (MFN) and full rates of duty, it is clear that the termination of China's MFN status wouldresult in substantial increases in the cost of imports from China. The average trade-weighted MFN duty rate on all2000 imports from China, dutiable as well asnondutiable, was 3.8% (on dutiable alone, 7.1%). Without MFN treatment, and assuming no change in the volumeof imports, this rate would have been at aboutthe 45% level. An even larger gap between the MFN and full-duty treatment would occur in the top categories ofU.S. imports from China, primarily because asubstantial share of them are duty free under MFN treatment but would be subject to high duty rates without it.

On the basis of our recent survey of imports under the individual tariff items each of whose imports in 2000 exceeded $100 million (212 items in all) and whichtogether accounted for $66.7 billion (67.0%) of all U.S. imports from China in that year, the termination of China'sMFN status would increase the importers'overall cost of those products by over one-third, mostly in the range between 25% and 65%.

Compared to similar data for earlier years, these figures indicate a larger concentration of China's exports to the United States in duty-free products or thosedutiable at low rates (up to 10% ad valorem). Imports free of duty under the NTR tariff treatment accounted for 87out of 212 included tariff items, at a total valueof $36.3 billion (36.5% of total U.S. imports from China), and imports dutied at rates of up to 10% (mostly 5%) advalorem accounted for 104 tariff items, totaling$25.9 billion (26.0% of total imports) (see Table 2 ). The data also suggest a significantlyincreasing absolute intensification of China's exports to the UnitedStates in the product lines subject to zero or low-rate duty rates.

As a consequence of the changes brought about by the termination of China's NTR status, the trade pattern of articles now imported from China would be likely tochange substantially. Much of their sourcing would be likely to shift to suppliers in other countries or to domesticsuppliers. This restructuring also could andoften would result in higher costs to the importers and consumers of the articles involved. This, in part because thoselow-priced imports from China that wouldstill take place would generally be subject to higher, in many instances much higher, non-NTR duties, and in partbecause the cost of imports from alternativesources at NTR duty rates would most likely be higher than present imports of comparable goods from China dueto their higher product prices.

Although some of the increases in importers' costs would likely be in part absorbed in the subsequent chain of distribution, relative cost increases at the retaillevel would still be high, particularly on low-margin, moderately priced consumer goods (certain clothing, footwear,household electrical and electronic products,toys, etc.). China is now a substantial supplier of such goods, and some of them may, at least temporarily, evenbecome priced out of the U.S. market. Because ofthe type of the articles involved, the resulting increased costs and reduced availability would affectdisproportionately lower-income U.S. consumers.

On the Chinese side, such changes would obviously have an adverse effect by reducing significantly the U.S. demand for such imports from China. The size ofthis reduction and the impact of its adverse effect on China's economy would depend on a number of factors, but,in the opinion of several China trade experts,would be substantial. It would be, it is claimed, particularly damaging to the economy of China's southern provinces(Fujian and Guangdong), which are mostdependent on exports and where much of China's exports originate. Indirectly, it would also adversely affect HongKong and the economic benefits it derivesfrom being the port of transit for close to 60% of China's exports to the United States, and whose businesses alsohave substantial manufacturing interests in theneighboring southern China: hence, Hong Kong's general opposition to the withdrawal of China's MFN status. HongKong's reversion to China's sovereignty as aSpecial Administrative Region has not changed its international status as a separate trade and customs entity northe role it has played in the past in China'sforeign trade and other economic relations. A withdrawal of China's MFN status would also have adverseconsequences for other major investors in South China:Taiwan, Japan, and the United States.

Table 2. Incidence of Changes in Duty Rates Due to China's MFNStatus (imports in 2000 under 212tariff items, valued each $100 million and over;

Note: Due to rounding, detail may not add to total.

Depending on whether and, if so, in what way and to what extent China would retaliate against imports from the United States (by increasing its tariffs tonon-MFN levels, or taking other import-restrictive measures), the annual loss of U.S. exports to China could besignificant, most likely affecting U.S. exports ofgrain, power generating machinery, aircraft, and fertilizer products. Also likely to be adversely affected would beoverall U.S. economic relations with China,particularly U.S. investment and establishment of American businesses.

In addition to having serious adverse practical disapproval of the extension of temporary MFN/NTR treatment of China under the provisions of Title IV would gocounter to the obvious intent of the Congress to permanently normalize trade relations with China, expressed in thesubstantial vote in favor of P.L. 106-286 (seep. 14).

International Contractual Implications

Denial of China's MFN status would have to be implemented also with having regard of two relevant provisionsof the 1979 U.S.-China trade agreement, still inforce, addressing specifically the discontinuance of the agreement or of any of its provisions. In its automatic 3-yearextension provision (Article X.2), theagreement allows for its termination if either party to it "notifies the other of its intent to terminate this Agreementat least thirty (30) days before the end of aterm." The agreement also provides (in Article X.3) that "if either Contracting Party does not have domestic legalauthority to carry out its obligations under thisAgreement, either Contracting Party may suspend application of this Agreement, or, with the agreement of the otherContracting Party, any part of thisAgreement." This provision appears to be applicable with respect to MFN treatment in the event that the waiverauthority is withdrawn under the Jackson-Vanikamendment or the treatment itself is terminated by a specific newly enacted statute.

A more generally applicable provision (Article IX), which asserts "the right of either Contracting Party to take any action for the protection of its securityinterests," also might conceivably, if circumstances warranted, be used to suspend the MFN treatment.

An additional element to be considered in the context of U.S. MFN policy toward China is China's almost completed--if somewhat delayed--procedure formembership in the World Trade Organization (9) andthe obligation of WTO members (which include the United States) to accord to each other unconditionalMFN treatment in its all-encompassing meaning (i.e., not only with regard to tariffs). This obligation is containedin Article I of the General Agreement on Tariffsand Trade 1994 (GATT 1994), one of the many compacts resulting from the Uruguay Round of multilateral tradenegotiations that constitute the AgreementEstablishing the World Trade Organization.

China's accession to the WTO, the procedure for which was initiated in 1986, is a goal that China as well as many other WTO members, including the UnitedStates, are earnestly pursuing. China's 6-year-old negotiations of a bilateral trade agreement with the United States,the provisions of which make part of China'sprotocol of accession to the WTO, intensified in the several months prior to the early April 1999 visit to the UnitedStates by China's premier, Zhu Rongji, andresulted in a partial agreement on market access for agricultural and industrial products and various services. Thenegotiations to resolve several other differencesbetween the two countries, which the United States considered of essence for China's participation in the WTO,however, were temporarily suspended by China inthe wake of the accidental bombing by NATO aircraft of China's embassy in Belgrade. The bilateral negotiationswere resumed and were successfully concludedwith the signing of a voluminous and comprehensive bilateral agreement on November 15, 1999. There are,however, still some unresolved issues of interest tothe United States being negotiated multilaterally with the WTO.

China's accession has also become an issue of direct interest to Congress through the introduction in the 105th and 106th Congresses of several measures requiringstatutory approval of the U.S. support of such accession (see p. 5).

When China accedes to the WTO, the continuation of the present U.S. policy (which conditions China's MFN treatment by the United States on compliance withthe requirements of Title IV) or, more drastically, an imposition of additional restrictions on, or withdrawal of, MFNstatus from China would constitute aviolation of the U.S. obligations under the GATT 1994 Article I, calling for "general most-favored-nationtreatment" of all GATT signatories/WTO members. Insuch a case, China would--after its accession--have cause to submit the issue for resolution to the WTO DisputeSettlement Body.

One way for the United States to avoid such violation would be by taking recourse to WTO Article XIII. This article provides for nonapplication of all WTOmultilateral agreements between any current and a newly acceding member if, before the accession agreement ofthe new member is approved by the WTOGeneral Council, either country does not consent to such application. (10) If the United States and China then wished to apply reciprocally any otherprovisions ofthe WTO package of agreements (except permanent MFN treatment), they could technically do so by amending theexisting bilateral agreement or renegotiating itby including provisions for such application.

Such course of action, however, does not appear likely in practice under present circumstances, particularly in view of the fact that a comprehensive agreement,the benefits of which weigh heavily to the benefit of the United States, has already been reached between the UnitedStates and China as part of China's accessionto the WTO. Recourse to WTO Article XIII would also put this agreement on hold until the United States were ableto apply to China the WTO agreement in itsentirety, essentially by extending to it unconditional and permanent MFN status, a quid pro quo onwhich China would undoubtedly insist. (11)

Granting to China Permanent MFN Status (12)

Due to China's progress in its quest for accession to the WTO, the focus of congressional China MFN debatehas in recent years shifted from the issue of annualrenewals of China's status under a Jackson-Vanik waiver to one of granting China permanent unconditionalMFN/NTR status. The shift has been brought aboutby the likelihood that China will soon become a WTO member, and such membership will require both countriesto apply to each other permanentmost-favored-nation treatment. More crucially, denial of permanent NTR treatment on the part of the United Statesby continuing the practice of renewing itannually would make impossible the reciprocal application of the WTO Agreement as well as of the comprehensiveU.S.-China bilateral agreement, which wassigned on November 15, 1999, as part of the process of China's accession to the WTO (see preceding section).

Although attempts to grant permanent MFN/NTR status to China--whether unconditionally or tied to China's membership in the WTO--had been made alreadyin the 105th Congress, the action came to fruition in the 106th Congress.

Draft legislation authorizing the President to terminate the application of Title IV of the Trade Act of 1974 (including, principally, the Jackson-Vanik amendment)and by proclamation extend permanent nondiscriminatory treatment to China was transmitted by the White Houseto Congress in a Presidential message (13) onMarch 8, 2000. It was introduced on March 23 jointly by Senators Roth and Moynihan as S. 2277 and referredto the Committee on Finance, and onMay 15 by Representative Archer (by request; H.R. 4444 ) and referred to the Committee on Ways and Means.In addition to the language ofcomparable legislation enacted earlier to grant permanent nondiscriminatory status to several other NME countriesin similar situations, the two bills required thePresident to transmit to Congress, before making the determination terminating the application of Title IV to China,a report certifying "that the terms andconditions for China's accession to the WTO are at least equivalent to those agreed" in the U.S.-China bilateralagreement. The bills also set as the effective dateof the legislation a date "no earlier than the effective date of China's accession to the WTO," thereby equating theextension of permanent MFN status to Chinaunder domestic law with the United States' identical international obligation under the WTO.

H.R. 4444 was amended and reported favorably by the House Ways and Means Committee with the addition of provisions detailing criteria andprocedures for product-specific remedial action--to remain in force for 12 years--against disruption of the U.S.market by surges in imports from China.Anti-surge provisions would apply regardless of whether such surges are autonomous or caused by diversion ofChinese exports from third countries to the UnitedStates because of import-safeguard action by those countries against disruptive surges in their imports fromChina. (14) These provisions, a bipartisan proposalbyRepresentatives Levin and Bereuter and supported by the Administration, address the concern regarding possibleinjurious consequences of China's permanentNTR status. They are the U.S. domestic enactment of the special anti-surge mechanism negotiated as part of theU.S.-China bilateral agreement, but made part ofChina's WTO accession protocol and applicable on an MFN basis to any WTO member country's imports fromChina.

H.R. 4444 was further amended by the Rules Committee (15) with the addition of provisions establishing a Congressional-ExecutiveCommission tomonitor and report on China's human rights and compliance with WTO commitments, and a task force to monitorand enforce China's compliance with the U.S.anti-slave-labor statute, establishing programs to develop China's commercial and labor law, and expressing thesense of Congress that China's and Taiwan'saccession to the WTO be approved at the same time. The Rules Committee version was passed by the House onMay 24, 2000, in a roll-call vote of 237 to 197.

S. 2277 was reported favorably without amendment on May 25, 2000, (16) but not further considered. Instead, the Senate, on September 7, 2000,began considering H.R. 4444 . Due to a large number of amendments--none of which was agreed to-- thedebate on the measure was protracted andthe vote on it was delayed to September 19, when it was passed by a vote of 83 to 15 and on October 10, 2000signed by the President (Title I, P.L. 106-286 ).

Even though legislation approving China's permanent normal trade relations (PNTR) status has been enacted, PNTR treatment itself--in accordance with thelegislation--will not enter into force until China accedes to the WTO. The accession becomes effective 30 days afterChina ratifies the protocol ofaccession--now still being negotiated--and a decision by the WTO General Council (foreseeably in late 2001)approving China's accession.

Action during the 107th Congress

China's favorable MFN/NTR situation after the legislative approval of the U.S.-China bilateral trade agreementsuffered a setback in early April 2001 as a result of the negative reaction in Congress as well as in the general public, triggered by China's intransigence followingthe April 1 collision, over international watersoff the coast of South China, of a U.S. Navy reconnaissance plane and a Chinese fighter. Legislative reaction inCongress to China's insistence that the UnitedStates apologize for the accident was swift: on April 4, Representative Hunter and a large number of cosponsorsintroduced H.R. 1467 to repealnondiscriminatory trade treatment of China, whether temporary or permanent, and prohibit any subsequent extension of it. On the same day, a somewhat lessradical measure ( H.R. 1497 ) was introduced by Rep. Murtha and seven cosponsors, repealing the alreadyenacted permanent NTR status to China, butleaving the Title IV authority for temporary NTR status unchanged with respect to China. Both bills were referredto the Ways and Means Committee, but thus farsaw no further action. (17)

Despite this opposition in Congress, the President, on June 1, 2001, renewed China's Jackson-Vanik waiver for one year (Presidential Determination 2000-16; 66FR 30631). This temporary extension was necessary because China's permanent NTR, enacted by P.L. 106-286 , willenter into force only after China's accessionto the WTO. H.J.Res. 50 to disapprove the extension of China's Jackson-Vanik waiver was introduced June 5, 2001,by Rep. Rohrabacher, and a hearing on thesubject was held by the Ways and Means Trade Subcommittee on July 11, 2001. H.J.Res. 50 was reported adverselyon July 18, 2001, (18) and defeated (169 - 259)in the House on July 19, 2001, allowing China's J-V waiver (and nondiscriminatory status) to remain in forcethrough July 2, 2002.