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Permanent Normal Trade Relations for China: An Historic Moment for U.S.-China Relations

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Permanent normal trade relations for China: An historic moment for U.S.-China relations (9/19/00)

The Senate's Passage Of Permanent Normal Trade Relations For China Marks An Historic Moment In U.S.-China Relations. Passage of PNTR by both the House and the Senate marks an historic moment in our pursuit of open markets and stronger U.S.-China relations, and continues to pave the way toward economic freedom for the Chinese people.

China's Entry To The WTO Will Slash Barriers To The Sale Of American Goods And Services In The World's Most Populous Country. China's entry into the WTO will dramatically cut import barriers currently imposed on American products and services. This agreement locks in and expands our access to a market of over one billion people. China's economy is already among the world's largest and over the past 20 years has expanded at a phenomenal annual rate of nearly 10 percent. During this period, U.S. exports to China have grown from negligible levels to over $14 billion each year. For agriculture alone, USDA estimates that China's WTO accession would result in $2 billion annually in additional U.S. agricultural exports by 2005.

China Made Unilateral Concessions; We Will Simply Maintain The Market Access Policies We Already Apply To China. China made significant, one-way market-opening concessions across virtually every economic sector, including increasing access to its markets for agriculture, services, technology, telecommunications, and manufactured goods. China also agreed to eliminate "unseen" barriers, such as exclusive rights to import and distribute goods.

  • Agriculture tariffs will be cut by more than half on priority products. On U.S. priority agricultural products, tariffs will drop from an average of 31% to 14% by January 2004, with even sharper drops for beef, poultry, pork, cheese, and other commodities. China will significantly expand export opportunities for bulk commodities such as wheat, corn, and rice, and it will eliminate trade-distorting export subsidies. Our producers may also export and distribute directly inside China for nearly every agricultural product without going through state-trading enterprises or middlemen. Sales in the Chinese market will be a boon to American farmers, who have recently faced tough times.
  • Industrial tariffs will be slashed. Industrial tariffs on U.S. products will fall from an average of 24.6% in 1997 to an average of 9.4% by 2005. Considering that manufactured goods comprise a large proportion of American exports, the drop in Chinese tariffs is good news for our high-tech manufacturers and basic industries.
  • Right to import and distribute. At present, China severely restricts trading rights (the right to import and export) and the ability to own and operate distribution networks, both essential to move goods and compete effectively in any market. Under the agreement, China will phase in trading rights and distribution services over three years, and also open up sectors related to distribution services, such as repair and maintenance, warehousing, trucking, and air courier services. Trading rights and distribution services will allow our businesses to export to China from here at home, and to have their own distribution networks in China, rather than being forced to set up factories in China to sell products through Chinese partners. This is a top priority of U.S. manufacturers and agricultural exporters.
  • New markets for information technology. China will participate in the Information Technology Agreement and will eliminate tariffs on products such as computers, semiconductors, and related products by 2005. Our IT firms lead the world and stand to earn handsomely in this huge, expanding, and information-hungry market.
  • Broad new access for American services like telecom/insurance/banking. The agreement also opens China's market for services. For the first time, China will open its telecommunications sector and significantly expand investment and other activities for financial services firms. And it will greatly increase the opportunities open to professional services such as law firms, management consulting, accountants, and environmental services. China also agrees to ensure the existing level of market access already in effect at the time of China's accession for U.S. services companies currently operating in China, protecting against new restrictions.

China's Accession to the WTO Will Strengthen Our Ability To Ensure Fair Trade And To Protect U.S. Agricultural And Manufacturing Base From Import Surges, Unfair Pricing, And Abusive Investment Practices Such As Offsets Or Forced Technology Transfer. Prior to the negotiation of the U.S.-China accession deal, Democrats and Republicans in Congress raised legitimate concerns about the importance of safeguards against unfair competition. As a result, no agreement on WTO accession has ever contained stronger measures to strengthen guarantees of fair trade and to address practices that distort trade and investment. This agreement addresses those concerns through:

  • A China-specific safeguard. For the first 12 years -- in addition to the existing global safeguard provisions -- China has also agreed to a country-specific safeguard that is stronger and more targeted relief than that provided under our current Section 201 law. This ensures that the U.S. can take effective action in case of increased imports of a particular product from China that cause or threaten to cause market disruption in the United States. This applies to all industries, permits us to act based on a lower showing of injury, and permits us to act specifically against imports from China.
  • Strong anti-dumping protections. The agreement includes a provision recognizing that the U.S. may employ special methods, designed for non-market economies, to counteract dumping for 15 years after China's accession.
  • Requiring China to eliminate barriers to U.S. companies that can cost American jobs and technology. For the first time, Americans will have a means, accepted under the WTO rules, to combat such measures as forced technology transfer, mandated offsets, local content requirements and other practices intended to drain jobs and technology away from the U.S. As stated above, we will be able to export to China from home, rather than seeing companies forced to set up factories in China in order to sell products there.
  • Provisions in WTO rules that allow the U.S. -- even when dealing with a country enjoying NTR status -- to continue to block imports of goods made with prison labor, to maintain our export control policies, to use our trade laws, and to withdraw benefits including NTR in a national security emergency.

China's Accession Will Help Promote Reform In China And Create A Safer World. China's accession to the WTO will encourage Chinese leaders to move in the direction of meeting the demands of the Chinese people for openness, accountability, and reform. The agreement:

  • Deepens market reforms. Obligates China to deepen its market reforms, empowering leaders who want their country to move further and faster toward economic freedom. This agreement will expose China to global competition and thereby bring China under even more pressure to privatize its state-owned industries and expand the role of the market in the Chinese economy. Chinese as well as foreign businessmen will gain the right to import and export on their own, and to sell their products without going through government middlemen.
  • Accelerates removal of government from lives of China's people. Accelerates a process that is removing the government from vast areas of China's economic life. China's people will have greater scope to live their lives as they see fit. In opening China's telecommunications market, including to Internet and satellite services, the agreement will over time expose the Chinese people to information, ideas and debate from around the world. As China's people become more mobile, prosperous, and aware of alternative ways of life, they will seek greater say in the decisions that affect their lives.
  • Strengthens rule of law in China. Obliges the Chinese government to publish laws and regulations and subjects pertinent decisions to review of an international body. That will begin to strengthen the rule of law in China and increase the likelihood that it will play by global rules as well. It will advance our larger interest in bringing China into international agreements and institutions that can make it a more constructive player in the world, with a stake in preserving peace and stability.

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