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China MFN [4]
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These records pertain to China's Most Favored Nation status.
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Originally Processed With FOIA(s):
FOIA Number:
2012-1098-F
2012-1098-F
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the George Bush Presidential
Library Staff.
Record Group/Collection:
George H.W. Bush Presidential Records
Collection/Office of Origin:
Legislative Affairs, White House Office of
Series:
Dyer, James W., Files
Subseries:
OA/ID Number:
08451
Folder ID Number:
08451-008
Folder Title:
China MFN [4]
Stack:
Row:
Section:
Shelf:
Position:
G
20
11
6
1
Withdrawal/Redaction Sheet
(George Bush Library)
Doc. No. / Type
Subject/Title
Date
Restriction
Classification
01. Letter
Draft Response to Baucus Letter (3 pp.)
n.d.
(b)(1)
02. Notes
Handwritten notes re: Iran-Contra (1 pp.)
n.d.
(b)(1)
03a. Letter
To: Senator Baucus From: Brent Scowcroft
7/8/91
(b)(1)
Re: China's MFN Status [draft] (4 pp.)
03b. Paper
Re: Trade and Economic Issues (10 pp.)
7/8/91
(b)(1)
04. Letter
To: Senator Baucus From: Brent Scowcroft
7/8/91
(b)(1)
Re: China's MFN Status [draft III] (1 pp.)
05. Letter
To: Senator Baucus From: President Bush
n.d.
(b)(1)
S
Re: China's MFN Status (8 pp.)
06. Paper
Re: Trade and Economic Issues (14 pp.)
7/8/91
(b)(1)
Page 1 of 1
Collection:
Record Group:
Bush Presidential Records
Office:
Legislative Affairs, White House Office of
Series:
Dyer, James W., Files
Subseries:
WHORM Cat.:
File Location:
China MFN [4]
Pinksheet Number:
MB4341
OA/ID Number:
08451-008
Date Closed:
9/24/2012
FOIA/Sys Case #:
2012-1098-F
Re-review Case #:
P-2/P-5 Review Case #:
DRAFT RESPONSE TO BAUCUS LETTER
Dear
:
I appreciated receiving your views on the importance of
renewing China's most-favored-nation (MFN) trade status while
also seeking to achieve progress with the Chinese on issues of
vital concern to the American people. We clearly share the
same goals. We want to see China return to the path of reform,
show greater respect for human rights, adhere to international
norms on weapons sales, and practice fair trade.
You rightly note that withdrawing MFN would hurt not only
Americans but also the people of Hong Kong and the millions in
China who are working for progressive change. Continuing MFN
is vital to protect American consumers and exporters, and to
support the economic forces that have been driving reform in
China for more than a decade. It is no accident that the
process of reform started when foreign businesses began
operating in that nation. Those favoring an end to political
and economic reform in China would stand to gain the most if
MFN were withdrawn now. Those hurt most would be the economic
forces driving political and social change and encouraging a
loosening of state control and more personal freedom. Other
losers would be tens of thousands of Americans in industries as
diverse as agriculture and aircraft construction. Once lost to
our trade competitors, the markets that took us a decade to
build would likely never be regained.
I support the view that strong, targeted measures are
needed to address our concerns in China, and I have not
hesitated to use them. To underscore our concerns about human
rights violations, sanctions imposed after the Tienanmen Square
crackdown, including those regarding arms sales, high level
contacts, U.S. economic programs and U.S. support for World
Bank lending to China, remain in place. The depth of our
shared concern is underlined by the fact that the U.S. is the
only nation maintaining its Tienanmen sanctions and refusing to
normalize relations until China makes substantial progress on
human rights.
We have, for example, supported only those World Bank loans
that serve the basic human needs of the Chinese people. To
reemphasize our opposition to other types of loans, I will make
clear to our G-7 allies -- Canada, France, Germany, Great
Britain, Italy, and Japan -- at the upcoming London Summit the
importance we attach to applying this standard to proposed
multilateral development loans for China. I will also ask them
to continue to stress to Chinese leaders the importance that
their governments attach to progress on human rights.
-2-
To advance our nonproliferation objectives, I recently
authorized a number of steps aimed to make clear our strong
opposition to destabilizing Chinese weapons transfers. In
April, I rejected satellite component licenses for a Chinese
communications project because of Chinese companies'
involvement in unacceptable missile equipment transfers. Since
then, I approved legal sanctions against two Chinese companies
that unacceptably transferred missile technology. In addition,
I directed that no further exports of high speed computers or
satellites be allowed until our concerns are satisfactorily
addressed.
I am pleased that China has agreed to participate in
consultations regarding the recently announced Middle East Arms
Control initiative, with the goal of restricting arms exports
to the region. To help ensure that strict multilateral
technology restrictions are imposed on China pending Beijing's
adherance to accepted international standards, I have
instructed U.S. officials to seek agreement within COCOM that
other countries not export high speed computers to China until
the Chinese Government strengthens its nonproliferation
practices. I have also instructed the Under Secretary of State
for International Affairs, who recently travelled to Beijing
for a detailed discussion of nonproliferation issues, to hold
follow up discussions with Chinese officials on such important
issues as China's adherance to the Nuclear Nonproliferation
Treaty and the Missile Technology Control Regime.
I have also instructed U.S. agencies to press vigorously
our concerns about unfair Chinese trade practices. In April, I
authorized the U.S. Trade Representative to designate China
under the Special 301 provisions for violation of U.S.
intellectual property rights. We are also strictly enforcing
the terms of our textile agreement with China and have made two
charges against China's quota in illegal textile shipments
through third countries, including one for $85 million.
In keeping with my determination to take targeted steps to
achieve specific objectives in the broad scope of our
relationship, I am prepared to take further action on these
issues. If China does not make adequate progress during the
301 investigation, I will take strong trade action using the
broad legal authority at my disposal. (Similarly, if China
does not exert effective control over illegal textile
shipments, we will inform the Chinese that renegotiation of our
bilateral textile agreement is necessary.)
Reports that prison labor exports from China might be
entering the U.S. are a matter of serious concern. The Customs
Service is currently investigating these charges. In addition,
through high-level consultations with the Chinese Government,
U.S. officials have obtained a firm commitment to end the
export of prison labor products to the U.S. I can assure you
that we will continue to monitor China's behaviour in this area
closely and will firmly enforce the law when we find evidence
of illegal prison labor exports to the U.S.
-3-
(To ensure that prison labor exports from China are not
entering the U.S. in violation of our laws, I have ordered the
following additional measures. The Department of State will
seek to negotiate a memorandum of understanding with China on
procedures for the prompt investigation of allegations that
specific imports from China were produced by prison labor.
Pending negotiation of this agreement, the U.S. Customs Service
will temporarily embargo products from China when there is a
reasonable suspicion that the products were made by prison
labor. The burden of proof will then lie on the Chinese
Government or the Chinese exporter to provide credible evidence
that the products were not produced by prison labor. Only when
such proof is provided will the embargo be lifted. I am also
instructing the U.S. Customs Service to identify an office to
recieve information on prison labor exports and establish
procedures for the prompt investigation of reports of prison
labor exports from interested parties.)
Although it is not related to China's MFN status, I share your
interest in Taiwan's accession to the GATT. A major trading
economy, Taiwan can make an important contribution to the
global trading system through responsible GATT membership. The
U.S. has a firm position of supporting the membership of Taiwan.
on terms acceptable to GATT contracting parties. I am
therefore instructing the US Trade Representative to take
immediate steps to ensure that other GATT members clearly
understand our position, and to work actively with other GATT
members to resolve issues relating to Taiwan's GATT accession.
Because China, our tenth largest trading partner, could also
make an important contribution to the global trading system, I
will be working to ensure that the Chinese Government takes
steps on trade reform so its GATT application can advance and
its trade practices can be brought under GATT disciplines.
The concrete steps I have outlined above are carefully
targeted to achieve specific objectives, an approach consistent
with that proposed by you and your colleagues, and which I
believe to be most effective. Our fundamental goals are to
change China's behavior and promote the process of reform
there. You can be sure that I will continue to take action to
pursue our shared goals. I will report to you within six
months on the status of the actions I have taken.
Sincerely,
Withdrawal/Redaction Sheet
(George Bush Library)
Document No.
Subject/Title of Document
Date
Restriction
Class.
and Type
02. Notes
Handwritten notes re: Iran-Contra (1 pp.)
n.d.
(b)(1)
Collection:
Record Group:
Bush Presidential Records
Office:
Legislative Affairs, White House Office of
Series:
Dyer, James W., Files
Subseries:
WHORM Cat.:
File Location:
China MFN [4]
Date Closed:
9/24/2012
OA/ID Number:
08451-008
FOIA/SYS Case #:
2012-1098-F
Appeal Case #:
Re-review Case #:
Appeal Disposition:
P-2/P-5 Review Case #:
Disposition Date:
AR Case #:
MR Case #:
AR Disposition:
MR Disposition:
AR Disposition Date:
MR Disposition Date:
RESTRICTION CODES
Presidential Records Act - |44 U.S.C. 2204(a)]
Freedom of Information Act - [5 U.S.C. 552(b)]
P-1 National Security Classified Information [(a)(1) of the PRA]
(b)(1) National security classified information [(b)(1) of the FOIA]
P-2 Relating to the appointment to Federal office [(a)(2) of the PRA]
(b)(2) Release would disclose internal personnel rules and practices of an
P-3 Release would violate a Federal statute [(a)(3) of the PRA}
agency [(b)(2) of the FOIA]
P-4 Release would disclose trade secrets or confidential commercial or
(b)(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information [(a)(4) of the PRA]
(b)(4) Release would disclose trade secrets or confidential or financial
P-5 Release would disclose confidential advice between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
(b)(6) Release would constitute a clearly unwarranted invasion of
P-6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRA]
(b)(7) Release would disclose information compiled for law enforcement
purposes |(b)(7) of the FOIA]
C. Closed in accordance with restrictions contained in donor's deed of
(b)(8) Release would disclose information concerning the regulation of
gift.
financial institutions [(b)(8) of the FOIA]
(b)(9) Release would disclose geological or geophysical information
PRM. Removed as a personal record misfile.
NATIONAL SECURITY COUNCIL
July 9, 1991
FOR: JANET MULLINS
KENT WIEDEMANN
JIM DYER
MIKE ANDRICOS
BILL MACKAY
JOSH BOLTEN
FROM: DOUG PAAL
Attached are latest version of materials
in response to the Baucus letter. There
will be a meeting in Doug Paal's office
today at 5:30 to discuss this issue.
Please identify to my office who will
attend today's meeting -- 395-5746.
Doug
7/8/91 1850
CONFIDENTIAL
DRAFT
DECLASSIFIED
PER NSC WAIVER, 1500 2021-02
By SS NARA, Date 6/20/25
Dear Senator Baucus:
I appreciated receiving your views on the importance of renewing
China's most-favored-nation (MFN) trade status while also seeking
to achieve progress with the Chinese on issues of vital concern
to the American people. We clearly share the same goals. We
want to see China return to the path of reform, show greater
respect for human rights, adhere to international norms on
weapons sales, and practice fair trade. China should contribute
to international stability and not detract from it.
You rightly note that withdrawing MFN would hurt not only
Americans but also the people of Hong Kong and the millions in
China who are working for progressive change. Continuing MFN is
essential to protect American consumers and exporters, and to
support the economic forces that have been driving reform in
China for more than a decade.
MEN stitus
From the start of the U.S.-China relationship in the 1970s, it
enjoyed strong bipartisan support. Your letter is in that fine
tradition. Building on the three U.S. -China communiques, U.S.
interaction with the government and people of China has produced
demonstrable progress. That interaction must continue despite
the recent severe setbacks. Nevertheless, I support the view
that WILL strong measures are needed to address our concerns in China
and have not hesitated to use them in a targeted fashion. To
underscore our deep dismay about human rights violations, I have
kept in place a number of sanctions since - the Tiananmen Square
crackdown, affecting arms sales, high-level contacts, U.S.
economic programs and U.S. support for World Bank lending to
China.
therefore
The U.S. is currently the only Western democracy maintaining its
Tiananmen sanctions and refusing to normalize relations until
China makes substantial progress on human rights. For example,
while our allies and other World Bank members have supported all
of the last fifteen bank loans to China, we have declined to
support nine because the loans would not serve basic human needs.
At the London Summit, I intend to raise China's human rights
practices with our G-7 allies and encourage them to continue to
stress to China's leaders, as we have repeatedly, the importance
that democratic governments attach to human rights. I will make
clear that the U.S. will continue its policy of supporting only
those multilateral development loans for China that serve basic
human needs. I will also strongly urge that any lending to China
help to promote market-oriented economic reform.
(needs more)
2
To advance our nonproliferation objectives, I recently authorized
a number of steps aimed at engaging the Chinese on their weapons
transfer policies and making clear our dissatisfaction with
transfers that contribute to regional instability. The Under
Secretary of State for International Security Affairs recently
traveled to Beijing for a detailed discussion of nonproliferation
issues, including our specific concerns about Chinese exports.
He will be holding follow-up discussions to press for China's
adherence to the Nuclear Nonproliferation Treaty and the Missile
Technology Control Regime, actions I called for in my
commencement speech at Yale University on May 27. China's
positive response to my invitation to participate in the Middle
East arms control initiative also gives us the opportunity to
seek Chinese restraint in arms sales to this volatile region in a
multilateral context.
At the same time, I have also taken measures to emphasize to
China that the U.S. is concerned about reports of unacceptable
missile-related transfers. In April, I rejected satellite
component licenses for a Chinese communications project because
of the involvement of Chinese companies in unacceptable missile
equipment transfers. Just recently, I approved trade sanctions
against two Chinese companies for that same reason. In addition,
I directed that no further licenses of high-speed computers to
China and no further exports of satellites would occur until our
concerns that China adhere to accepted international standards
are satisfactorily addressed. The U.S. will be engaging with
other countries in order not to undercut these measures. Our
experience has demonstrated that such consultations will lead to
effective, multilateral technology transfer restrictions.
I have also instructed U.S. agencies to press vigorously our
concerns about Chinese unfair trade practices. In April, I
authorized the U.S. Trade Representative to identify China as a
priority foreign country under the Special 301 provisions of the
Trade Act for failing to protect U.S. intellectual property
rights. If China does not make adequate] progress during the 301
investigation, trade action will follow. Beyond intellectual
property protection, my Administration has invited senior Chinese
trade officials to Washington in August for continuation of
consultations begun in June regarding access for U.S. products to
the Chinese market. If these talks fail to produce Chinese
commitments to take substantial measures to improve market access
good
for U.S. goods and services, the Administration will self-
initiate further action under Section 301 of our trade laws.
We are strictly enforcing the terms of our textile agreement with
China and have already made charges against China's quota because
of illegal textile shipments through third countries totalling
approximately $85 million so far. Following consultations in
July, we expect to make additional charges. If China does not
exert effective control over these illegal shipments, we are
3
prepared to take further action against China, beyond charging
China's textile quota the documented amount of transhipment.
Charges of prison labor exports from China are a matter of
serious concern. The Customs Service is investigating these
charges. In addition, we have obtained a firm high-level
commitment to prevent the sale of prison labor products to the
U.S. We will continue to monitor China's behavior in this area
closely and will strictly enforce relevant legislation concerning
prison labor exports to the U.S. In particular, I am ordering
the following additional measures: The Department of State will
seek to negotiate a memorandum of understanding with China on
procedures for the prompt investigation of allegations that
specific imports from China were produced by prison labor.
Pending negotiation of this agreement, the U.S. Customs Service
will temporarily embargo products imported from China when there
is reasonable indication that the products were made by prison
labor. The embargoes will continue until the Chinese Government
or the Chinese exporter provides credible evidence that the
products were not produced by prison labor.
I am also instructing the U.S. Customs Service to identify an
office to receive information on prison labor exports and
establish procedures for the prompt investigation of reports of
prison labor exports from interested parties. Additional customs
inspectors will be directed to identify prison labor exports and
aid officials in uncovering illegal textile transhipments.
I share your interest in Taiwan's accession to the GATT, although
this issue is not directly related to China's MFN status. A
major trading economy, Taiwan can make an important contribution
to the global trade system through responsible GATT membership.
So also can China, which is our tenth largest trading partner.
The U.S. has a firm position of supporting the membership of
Taiwan, as well as China, on terms acceptable to GATT contracting
parties. The United States will work actively with other GATT
members to resolve in a favorable manner the issues relating to
Taiwan's GATT accession [and to form a Working Party formally to
consider the request of Taiwan -- as a customs territory -- to
negotiate terms of accession.] I am also urging the Chinese
Government to take steps on trade reform so that China's GATT
application can advance and its trade practices can be brought
under GATT disciplines through the Working Party formed for China
in 1987. U.S. support for Taiwan's accession as a customs
territory should in no way be interpreted as a departure from the
long standing policy of five administrations which acknowledges
the Chinese position that there is only one China, and that
Taiwan is part of China. By the same token, the U.S. has
important economic interests to pursue, and they are not served
when our fifth largest trading partner is made to wait for China,
as a whole, to improve its own trade practices.
4
In sum, therefore, I am prepared to address the concerns you and
your colleagues have identified, and I am doing so. But
discontinuing MFN, or attaching conditions to its renewal, would
cause serious harm to American interests and would render futile
pursuit of the initiatives I have outlined, which are discussed
in greater detail in the attachments. Working together, I
believe we will best protect America's interests by remaining
engaged with China and the Chinese people.
Sincerely,
Brent Scoweroft
The Honorable Max S. Baucus
United States Senate
Washington, D.C. 20510
7/8/91 1850
CONFIDENTIAL
DRAFT
PART I: TRADE AND ECONOMIC ISSUES
The Administration is committed to achieving with China the same
goals that have guided our trade policy with all other countries.
We seek open markets and the opportunity for U.S. firms and their
products to compete on fair and equal terms. To achieve these
goals, and realize the principles of equality, mutual benefit and
non-discrimination set forth in the U.S.-China Bilateral Trade
Agreement, this Administration has pursued a policy of
negotiation and engagement on trade issues with China. In
particular, the Administration has sought to improve U.S. access
to China's marketplace; to bolster Chinese protection of
intellectual property; to end fraudulent practices by Chinese
textile exporters using false country of origin declarations;
and, to induce Beijing to undertake the economic and trade
reforms required for membership in the GATT.
Reciprocal MFN tariff treatment underpins our ability to work
constructively with the PRC. China's desire to retain access to
the U.S. market has enabled us to engage Chinese leaders in
periods of tension. We believe that discontinuing MFN, or
attaching conditions to its renewal, would cause serious harm to
our trade interests and erode our ability to influence China's
behavior on key trade issues.
A. The Past Decade of Bilateral Trade Relations
After decades of adhering to an import-substitution strategy that
focused on minimizing China's reliance on outside sources of
machinery and equipment, in the 1980's China has sought outside
sources of these goods. It also has increasingly drawn on
foreign technology, expertise, and funds by actively encouraging
joint ventures.
China's opening to the outside world has helped transform its
economy, bolstering reform-oriented sectors that are not directly
controlled by the central government. For example, the state
sector now produces just over half of China's industrial output;
in 1978, its share was 78 percent. China's dynamic rural
industries, which are privately and collectively owned, have
burgeoned. The 30,000 foreign-invested ventures China now has
are valued at $40 billion. The impact of China's open door has
been particularly pronounced in coastal areas, where 90 percent
of the foreign investment and more than three-fourths of China's
trade activities are located. This region, in turn, has become
the primary engine of economic reform in China largely as a
result of the introduction of market concepts to Chinese
employees of joint ventures and to citizens engaging in
commercial exchanges with the West. The economic autonomy
fostered by this interaction contributes to increased political
and even individual self-determination.
DECLASSIFIED
PER NSC WAIVER, 1500 2021-02
CONFIDENTIAL
By 5 NARA, Date 6/20/25
Declassify on : OADR
CONFIDENTIAL
2
The United States has been a vital partner in this
transformation. Following Congressional approval of the
bilateral trade agreement, the United States and China
established formal trade relations and reciprocally granted most-
favored-nation (MFN) status in 1980. Growth in our commercial
ties has helped to change China and to bring it into the global
trading system. Since the resumption of normal trade relations,
U.S.-China two-way trade has increased almost 770 percent, from
$2.3 billion in 1979 to over $20 billion last year.
-- We are now China's second-largest trade and investment
partner and its largest export market.
-- China is our tenth-largest trade partner, up from fifteenth
in 1981.
--
Over 1,000 U.S. firms have invested more than $4 billion in
China and another $5 billion in Hong Kong related primarily
to trade with the PRC.
--
In 1990, the United States exported $4.8 billion worth of
goods to China, including:
--
$749 million worth of aircraft
--
$544 million worth of fertilizer
--
$512 million worth of grain
--
$281 million worth of cotton yarn and fabric
--
$264 million worth of electric machinery
--
$238 million worth of wood and wood pulp
--
$238 million worth of chemicals
--
$227 million worth of scientific instruments.
Commercial relations with the United States have exerted positive
influences on China's business and economic practices since 1980.
China has shifted away from total reliance on a strongly
centralized economy; shown greater tolerance for experimentation
with market mechanisms to regulate its domestic economy; and
decentralized and liberalized its foreign trade practices.
B. Regression in China's Trade Policies
China's opening to the outside world has not been smooth. Over
the past decade, attempts to accelerate the implementation of
market-oriented reforms have been followed by Beijing's
recentralization of control, as concern about the country's
ballooning trade deficit led Beijing to step in to regain some of
the trade authority it had relinquished.
Moreover, throughout the period since the normalization of trade
relations and the granting of reciprocal most-favored-nation
trading status in 1980, China's web of barriers to imports has
made it difficult for many U.S. exporters to gain access to the
Chinese market. U.S. firms have also had difficulty securing
protection for their intellectual property.
CONF IDENTIAL
CONFIDENTIAL
3
U.S. trade negotiators have long been engaged with the Chinese
Government, both in bilateral negotiations and in multilateral
consultations at the GATT held to review China's application for
membership. We have sought to ensure that bilateral commercial
relations develop in accord with the principles that underlie our
bilateral trade agreement: equality, mutual benefit, and
nondiscrimination. From 1979 through 1987, Chinese authorities
made some progress in dismantling nontariff barriers to imports,
in improving transparency, and in protecting the intellectual
property of foreigners.
This trend has been reversed over the last three years.
Since 1988, Chinese trade policies and practices have become
more protectionist, nontariff barriers to imports have
proliferated, and the trade system has become less
transparent. These policies undoubtedly contributed to a 17
percent decline in U.S. sales to China in 1990. China was
the only major foreign market for U.S. goods and services in
which our exports declined in 1990.
Despite intensive bilateral negotiations with Chinese
authorities since the USTR in 1989 placed China on the
"priority watch list" of countries providing inadequate IPR
protection--including three rounds of meetings over the past
five months--China has failed to live up to the commitments
contained in the bilateral Memorandum of Understanding (MOU)
signed in May 1989.
At the same time, other problems have developed in our bilateral
trade relationship. For example, to bypass U.S. textile and
apparel quotas Chinese exporters have increasingly resorted to
shipping these products to the United States via third countries
using false invoices and counterfeit visas. Also of concern to
us has been the apparent lapse in China's commitment to economic
and trade reforms that would bring the country in line with the
GATT's free-trade principles. China's reassertion of central
control over the past few years has called into question its
willingness and ability to undertake the obligations that would
be required of China as a contracting party to the GATT.
C.
Steps the U.S. Government Has Taken and Will Take to
Address Bilateral Trade Problems
In four key areas of our bilateral trade relations, the
Administration has taken steps to resolve trade problems. We are
prepared to do more.
On Market Access
Beginning in the fall of 1990, the Administration resumed
sub-cabinet level meetings with the Chinese, that had been
suspended since June 1989, to secure Chinese actions to
reverse the growing list of new protectionist measures.
CONFIDENTIAL
CONF IDENTIAL
4
In May 1991, the Administration formally set in motion a
market access initiative that commenced with the visit to
Beijing, in mid-June, of an interagency delegation to
discuss market access issues. In meetings with senior
Chinese officials, U.S. Government officials raised nine
types of market access barriers, including: the lack of
transparency in rules and regulations; the expansion of
import licensing requirements; the use of import
substitution policies; the proliferation of import bans and
quotas; the growth of standards, testing, and certification
requirements, including discriminatory "quality standards"
procedures for imports; the high level of many import
tariffs; the unnecessary use of certain phytosanitary
regulations; the uncertainties regarding government
procurement and tendering regulations; and the lack of
information regarding China's major development projects.
The Administration has proposed holding another round of
market access consultations in August 1991. If that round
of negotiations fails to yield substantial commitments from
the Chinese authorities to dismantle market access barriers,
the Administration will self-initiate Section 301 action to
address those barriers the removal of which offers the most
potential for achieving U.S. trade policy objectives and
increasing U.S. exports.
On Intellectual Property Protection
--
On April 26, 1991, USTR identified the PRC as a priority
foreign country that denies adequate and effective
protection of intellectual property rights.
Accordingly, on May 26, 1991 USTR initiated a Special
Section 301 investigation on the basis of four problem
areas: (1) inadequate copyright protection, (2) inadequate
patent protection, (3) inadequate trade secret protection
and (4) ineffective enforcement of trademarks.
--
Consultations with the Chinese are ongoing. The first round
of consultations occurred in mid-June and a second has been
proposed for August.
The deadline for making a determination under Section 301 is
November 26, 1991. This may be extended for three months if
China is making substantial progress in drafting or
implementing measures that will provide adequate and
effective protection of U.S. intellectual property rights.
At that time, the USTR must determine whether the acts,
policies and practices of the PRC are actionable under
Section 301 and what retaliatory action, if any, is
appropriate.
CONFIDENTIAL
CONFIDENTIAL
5
If the consultations fail to produce adequate and effective
protection of intellectual property rights, the
Administration will take retaliatory action.
On Textile Transhipments
The U.S. Customs Service has been vigilant in documenting
cases of Chinese textile transhipments over the past year.
In August 1990, USTR held consultations with Chinese
authorities on the transhipment issue. Additional
consultations took place in November 1990, March 1991, and
May 1991.
The U.S. Government "charged" China's quotas for goods that
were sent to the United States under false country of origin
declarations valued at over $85 million.
China has begun to take actions to curtail textile fraud
since the December charges were made. For example, it
issued regulations prohibiting reexports through a third
country to countries that have signed textile agreements
with China. Further, the Chinese Government has issued
provisions for the punishment of those who violate the
regulations.
The Administration has prepared more charges valued at about
$14 million that we anticipate will be levied after
consultations with China next month.
The Administration will increase the number of U.S. Customs
officials dedicated to investigating circumvention.
If transhipment persists, we will be prepared to take
further action against China, beyond charging China's
textile quota the documented amount imported through
transhipment.
On Forced Labor
The importation of goods produced with forced, convict or
indentured labor is prohibited by 19 USC Section 1307, which also
directs the Secretary of the Treasury to prescribe regulations
for enforcement of the provision. The Secretary of the Treasury,
under 19 CFR Section 12.42, has delegated to the Commissioner of
Customs, authority to determine that a class of goods is the
product of forced labor and exclude those goods.
Customs has been investigating imports alleged to be the product
of forced labor in China. Customs has interviewed emigres about
forced labor practices in China. Customs is also analyzing
import samples to determine if they match the descriptions
provided by the emigres and others. Additional special agents
have been detailed to Hong Kong to assist in the investigation.
CONFIDENTIAL
CONF IDENTIAL
6
Although the letter from Senator Baucus and fourteen co-signers
did not specifically address the issue of prison labor imports,
appropriate action is called for to fulfill the intent of
existing law. The Administration therefore proposes to negotiate
a memorandum of understanding with China on procedures for the
prompt investigation of allegations that specific products
exports to the U.S. are being produced by prison labor.
Pending negotiation of the MOU, Customs will temporarily embargo
specific products from China when there is reasonable indication
that they are made by prison labor. Embargoes will be lifted
only after the Chinese Government or the Chinese exporter
provides credible evidence that the products are not produced by
prison labor.
Multilateral Lending to China
The G-7 consensus, led by the United States, was successful in
prohibiting all MDB lending to China from June 1989 to February
1990 in response to the international outcry against the
crackdown by the Chinese authorities at Tiananmen Square.
From February 1990 to July 1990, the G-7 consensus supported a
gradual resumption of World Bank lending to China for projects
that clearly met basic human needs (BHN). The consensus held
firm and actively prohibited other loans from Board
consideration. Only five loans (totalling $590 million) were
approved in WBFY 1990. This is substantially less that pre-
Tiananmen Square levels of World Bank commitments to china, which
were $1.4 billion in WBFY 1988 and $1.3 billion in WBFY 1989.
At the Houston Summit in July 1990, several G-7 countries decided
that China's long-term development needs argued for lending
outside the BHN limits favored by the U.S. Accordingly, the G-7
Houston Summit Declaration of July 1990 on MDB lending to China
expanded the boundaries of permitted MDB lending to China to
include loans which were environmentally beneficial or which
supported market-oriented economic reform. Only BHN loans were
considered by the World Bank Board until December 4, 1990 when
the market oriented economic reform loan for Rural Industrial
Technology was approved by the Board. On November 29, 1990, the
ADB approved its first loan to China since Tiananmen Square,
Agricultural Bank Project, which the U.S. did not support.
Since March 1991, infrastructure projects outside the Houston
summit guidelines (highways, power plants, bridges, and railways)
have been approved for China by the World Bank and the Asian
Development Bank. The U.S. has and will continue to withhold
support on all non-BHN loans at the Board. In WBFY 1991 (which
ended June 30, 1991), World Bank lending to China totalled $1.6
billion.
On GATT Accession
--
Since China applied for GATT membership in July 1986, the
United States has been a leading participant in the
CONFIDENTIAL
CONFIDENTIAI
7
collective efforts of major GATT Contracting Parties to
develop terms for China's GATT participation that will
support the objectives of the GATT and will influence
Chinese Government policies to become, over time, more
compatible with the GATT framework for world trade.
U.S. and other major GATT contracting parties' concerns
about China's ability and willingness to live up to GATT
obligations, particularly since June 1989, have stalled
progress in the Working Party established to consider
China's application for membership in the GATT.
The Administration intends to continue to press Beijing to
undertake trade and economic reforms so that its GATT
application can advance and its trade practices be brought
under GATT disciplines.
At the same time, the Administration will work actively with
other GATT members to resolve in a favorable manner issues
relating to Taiwan's GATT accession [and support the
formation of a Working Party for the commencement of
accession deliberations.] U.S. support for Taiwan's
accession as a customs territory would be consistent both
with GATT legal criteria and the "one-China" policy which
acknowledges the Chinese position and has been adhered to by
successive U.S. Administrations.
Taiwan's GATT accession would yield substantial trade and
commercial benefits to the United States and to the
international trading system.
--
Taiwan has indicated that it is prepared to accede to
the GATT as a developed economy, to bind virtually all
its tariffs, and to join the major non-tariff measure
GATT codes.
D. The Importance of MFN
As highlighted above, the Administration is aggressively seeking
to resolve outstanding bilateral trade issues with the PRC. MFN
underpins our ability to work constructively with the PRC. We
believe that discontinuing MFN, or attaching conditions to its
renewal, would cause serious harm to our trade interests, and
would render futile pursuit of the initiatives outlined above.
It would reduce our leverage in market-access, intellectual
property rights protection, and other trade-related negotiations.
China's desire to retain access to the U.S. market has enabled us
to engage Chinese leaders in consultations on bilateral and
multilateral issues even during periods of tension. Because
China is not a GATT member and not bound by GATT trade
disciplines, it is especially important to have many levers that
enable us to engage the Chinese on trade issues.
It would hurt U.S. exporters. If the United Stated rescinds
China's MFN trading status, China will not only discontinue MFN
CONFIDENTIAL
CONF IDENTIAL
8
tariff treatment for the United States, but would likely cease
purchasing billions of dollars of U.S. wheat, aircraft,
fertilizer, cotton yarn and fabric, wood and wood pulp, electric
machinery, scientific equipment, and chemicals. Foreign
competitors, whose goods would be subject to lower tariffs, would
be quick to exploit our departure. Lost shares of China's market
would not easily be regained even if MFN were restored at some
future date.
It would hurt U.S. consumers. Tariffs on the 25 most important
U.S. imports from China would rise from the present average
tariff rate of 8.8 percent to an average rate of 50.5 percent.
These increases would mean sharply higher prices for lower-end
Chinese goods. The costs to U.S. consumers would be largely
borne by poorer Americans, who are primary consumers of low-cost
Chinese products.
It would damage America's reputation as a reliable trade partner.
Our trade competitors will not join us in denying MFN status to
China. Other Chinese trade partners, especially in Asia, urge
that China's MFN status be retained.
It would hurt investors, businesses, and workers in Hong Kong.
Loss of MFN would impede China's integration into the regional
economy, a development crucial to regional stability particularly
as we near the 1997 deadline for Hong Kong's reversion to Chinese
sovereignty. It could cost over 43,000 jobs in Hong Kong and
result in direct revenue losses of approximately $1.2 billion
dollars. Hong Kong's GDP growth could be curtailed by as much as
two percentage points.
It would set back efforts to bring about meaningful economic
reform in China. A disproportionate burden of the MFN denial
would fall on the primary engine of economic reform in China--the
economies of the southern and coastal provinces. In Guangdong
province, for example, 40 percent of industrial output is
produced for export, half of which goes to the United States.
SEctors that fall outside of the direct control of the central
government have been especially important to China's development
as an exporter; one-third of China's exports currently come from
rural (individual and collectively owned) industries and from
foreign-invested ventures. The foreign ties these provinces and
non-state-owned factories developed with the outside world prior
to Beijing's reassertion of central control in mid-1989 enabled
these provinces to weather the austerity program; without these
foreign markets, Beijing's grip would have been all the tighter.
As Beijing's influence over the regions and sectors most closely
integrated into the global economy has diminished, these regions
and sectors have become increasingly sensitive to global economic
conditions. Revocation of China's MFN trading status would cause
unemployment to rise and factory losses to mount in export-
producing regions.
E.
Conclusion
CONFIDENTIAL
CONF IDENTIAL
9
Those who engineered the violence in China in June 1989 are
unlikely to bear the economic costs associated with the denial of
MFN. Instead, those who suffer would be American businesses and
their employees, American consumers, and the people of Hong Kong
and the progressive areas of China.
China's opening to the outside world over the past decade has
accelerated growth in the non-state sectors of the economy;
resulted in strong links between China's coastal regions and the
global economy that have enabled this reformist region to weather
Beijing's periodic efforts to reimpose central government control
over economic activity; and introduced market concepts to a
generation of Chinese managers involved in joint ventures, trade
negotiations, and training in the West. For this process to
continue, China's most-favored-nation treatment in the United
States is essential.
CONFIDENTIAI
PART III: HUMAN RIGHTS
Human rights concerns have been at the heart of our
relationship with the PRC since the tragic events of June
1989. Every high-level meeting since that time has at least
touched on human rights issues, and several -- such as the
December 1990 visit to China by Assistant Secretary Schifter --
have been devoted exclusively to them. We have consistently
stressed to the Chinese leadership that there can be no return
to the kind of relationship we enjoyed before 1989 without
substantial improvements in China's human rights practices.
Our overall approach on human rights issues has consisted of:
o
Public expressions of concern.
President Bush condemned the brutal suppression of
demonstrations in Tiananmen Square in June 1989, the
first world leader to do so. He declared May 13, 1990
a National Day in Support of Freedom and Human Rights
in commemoration of the 1989 demonstrations, and
issued another statement to mark the anniversary of
the crackdown in 1991.
In our human rights reports for 1989 and 1990, we
strove to be fair but hard-hitting, and as accurate as
available information would allow. These reports have
drawn high praise from human rights groups, and harsh
condemnations from the Chinese government.
The State Department issued a statement on January 9,
1991 condemning the trials of nonviolent dissidents.
--
In April 1991 the President met the Dalai Lama at the
White House to demonstrate our respect for His
Holiness' nonviolent approach to conflict resolution
and our concern for human rights problems in Tibet.
O
Suspension of bilateral programs. On June 6 and June 20,
1989, the President announced the suspension of a number of
bilateral programs and changes in U.S. approach to
multilateral issues until the human rights climate in China
improved. Those suspensions generally remain in effect.
:
:
A multitude of high-level exchange visits that would
normally have taken place since 1989 have been
canceled. Only a very limited number of visits at and
above Assistant Secretary level have been approved on
a case-by-case basis, and only when they addressed
issues of key concern to the U.S. like human rights,
nonproliferation, unfair trade practices and narcotics.
visit
Dear Senator Baucus:
I appreciated receiving your views on the importance of
renewing China's most-favored-nation (MFN) trade status while
also seeking to achieve progress with the Chinese on issues of
vital concern to the American people. We clearly share the
same goals. We want to see China return to the path of reform,
show greater respect for human rights, adhere to international
norms on weapons sales, and practice fair trade. China should
contribute to international stability and not detract from it.
You rightly note that withdrawing MFN would hurt not only
Americans but also the people of Hong Kong and the millions in
China who are working for progressive change. Continuing MFN
is essential to protect American consumers and exporters, and
to support the economic forces that have been driving reform in
China for more than a decade.
From the start of the U.S.-China relationship in the 1970s,
it enjoyed strong bipartisan support. Your letter is in that
fine tradition. Building on the three U.S.-China communiques,
U.S. interaction with the government and people of China has
produced demonstrable progress. That interaction must continue
despite the recent severe setbacks. Nevertheless, I support
the view that strong measures are needed to address our
concerns in China and have not hesitated to use them in a
targeted fashion. To underscore our deep dismay about human
rights violations, I have kept in place a number of sanctions
since the Tiananmen Square crackdown, affecting arms sales,
high-level contacts, U.S. economic programs and U.S. support
for World Bank lending to China.
The U.S. is currently the only Western democracy
maintaining its Tiananmen sanctions and refusing to normalize
relations until China makes substantial progress on human
rights. For example, while our allies and other World Bank
members have supported all of the last fifteen bank loans to
China, we have declined to support nine because the loans would
not serve basic human needs.
At the London Summit, I intend to raise China's human
rights practices with our G-7 allies and encourage them to
continue to stress to China's leaders, as we have repeatedly,
the importance that democratic governments attach to human
rights. I will make clear that the U.S. will continue its
policy of supporting only those multilateral development loans
for China that serve basic human needs. I will also strongly
urge that any lending to China help to promote market-oriented
economic reform.
To advance our nonproliferation objectives, I recently
authorized a number of steps aimed at engaging the Chinese on
their weapons transfer policies and making clear our
dissatisfaction with transfers that contribute to regional
instability. The Under Secretary of State for International
Security Affairs recently traveled to Beijing for a detailed
discussion of nonproliferation issues, including our specific
P.02
H 31H1S 30 0990
4662 647 202 ¥
07/09/91 11:18
IN PROGRESS: ROLL NO. 205
YEA-AND-NAY
TIME REMAINING FINAL
AUTHOR (S) :
ON PASSAGE
-
REGARDING THE EXTENTION OF MOST FAVORED NATION TREATMENT TO
~
THE PRODUCTS OF CHINA
H R 2212
YEA
NAY
PRES NOT VOTING
DEMOCRATIC
230
31
6
REPUBLICAN
82
81
3
INDEPENDENT 1
TOTALS
313
112
9
TIME REMAINING FINAL
Y Abercrombie
Y
Bruce
Y
DeLauro
Y
Ackerman
Y
Bryant
Y
Dellums
Y
Andrews (ME)
Y
Bustamante
Y
Derrick
Y
Andrews (NJ)
Y
Byron
Y
Dicks
Y
Andrews (TX)
Y
Campbell (CO)
Y
Dingell
Y
Annunzio
Y
Cardin
Y
Dixon
Y
Anthony
Y
Carper
Y
Donnelly
Y
Aspin
Y
Carr
Y
Dooley
Y
Atkins
Y
Chapman
Y
Dorgan (ND)
Y
Bacchus
Y Clay
Y
Downey
Y
Barnard
Y Clement
Y
Durbin
Y
Beilenson
Y
Coleman (TX)
Y
Dwyer
Y Bennett
Y Collins (IL)
Y
Dymally
Y
Berman
Y
Collins (MI)
Y
Early
Y
Bevill
Y
Condit
Y
Eckart
Y
Bilbray
Y
Conyers
Y
Edwards (CA)
Y
Bonior
Y
Cooper
Y
Edwards (TX)
Y
Borski
Y
Costello
Y
Engel
Y
Boucher
Y
Cox (IL)
Y
English
Y
Boxer
Y
Coyne
Y
Erdreich
Y
Brewster
Y
Cramer
Y
Espy
Y
Brooks
Y
Darden
Y
Evans
Y
Browder
Y
DeFazio
Y
Fascell
ROLL NO. 205
DEMOCRATIC
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YEAS
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Y
Fazio
Y
Hubbard
Y
Levin (MI)
Y
Feighan
Y
Huckaby
Y
Levine (CA)
Y
Flake
Y
Hughes
Y
Lewis (GA)
Y
Foglietta
Y
Hutto
Y
Lipinski
Y
Ford (MI)
Y
Jefferson
Y
Lloyd
Y
Ford (TN)
Y Jenkins
Y
Long
Y
Frank (MA)
Y
Jones (GA)
Y
Lowey (NY)
Y
Frost
Y
Jones (NC)
Y
Manton
Y
Gaydos
Y
Jontz
Y
Markey
Y
Gejdenson
Y
Kanjorski
Y
Martinez
Y
Gephardt
Y
Kaptur
Y
Mavroules
Y Gibbons
Y
Kennedy
Y
Mazzoli
Y
Gordon
Y
Kennelly
Y
McCloskey
Y Gray
Y Kildee
Y
McCurdy
Y
Hall (OH)
Y
Kleczka
Y
McDermott
Y
Harris
Y
Kolter
Y
McHugh
Y
Hatcher
Y
Kostmayer
Y
McMillen (MD)
Y
Hayes (IL)
Y
LaFalce
Y
McNulty
Y
Hefner
Y
Lancaster
Y
Mfume
Y
Hertel
Y Lantos
Y
Miller (CA)
Y
Hochbrueckner
Y
LaRocco
Y
Mineta
Y
Horn
Y
Lehman (CA)
Y
Mink
Y
Hoyer
Y
Lehman (FL)
Y
Moakley
ROLL NO. 205
DEMOCRATIC
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YEAS
- CONTINUED
Y
Mollohan
Y
Payne (VA)
Y
Sawyer
Y
Moody
Y
Pease
Y
Scheuer
Y
Moran
Y
Pelosi
Y
Schroeder
Y
Mrazek
Y
Penny
Y
Schumer
Y
Murphy
Y
Perkins
Y
Serrano
Y
Nagle
Y
Peterson (FL)
Y
Sharp
Y
Neal (MA)
Y Pickle
Y
Sikorski
Y
Neal (NC)
Y
Poshard
Y
Sisisky
Y
Nowak
Y
Price
Y
Skaggs
Y Oakar
Y
Rahall
Y
Skelton
Y
Oberstar
Y
Rangel
Y
Slattery
Y
Obey
Y
Ray
Y
Slaughter (NY)
Y
Olin
Y
Reed
Y
Smith (FL)
Y
Olver
Y
Richardson
Y
Solarz
Y
Ortiz
Y
Roe
Y
Spratt
Y
Orton
Y
Rose
Y
Staggers
Y
Owens (NY)
Y
Rostenkowski
Y
Stallings
Y
Owens (UT)
Y
Rowland
Y
Stark
Y
Pallone
Y
Roybal
Y
Stokes
Y
Panetta
Y
Russo
Y
Studds
Y
Parker
Y
Sabo
Y
Swett
Y
Patterson
Y
Sangmeister
Y
Swift
Y
Payne (NJ)
Y
Savage
Y
Synar
ROLL NO. 205
DEMOCRATIC
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YEAS
- CONTINUED
Y
Tallon
Y
Tanner
Y
Thomas (GA)
Y
Thornton
Y Torricelli
Y
Towns
Y
Traficant
Y
Traxler
Y
Unsoeld
Y
Valentine
Y
Vento
Y
Visclosky
Y
Volkmer
Y
Washington
Y Waters
Y
Waxman
Y Weiss
Y
Wheat
Y Wilson
Y
Wise
Y Wolpe
Y Yates
Y
Yatron
ROLL NO. 205
DEMOCRATIC
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YEAS
- CONTINUED
N
Alexander
N
Roemer
N
Anderson
N
Sarpalius
N
Applegate
N
Stenholm
N Brown
N
Tauzin
N Geren
N
Taylor (MS)
N Glickman
N
Torres
N
Gonzalez
N
Williams
N Guarini
N Wyden
N
Hall (TX)
N
Hamilton
N
Hayes (LA)
N
Hoagland
N
Johnson (SD)
N
Johnston
N
Kopetski
N
Laughlin
N Luken
N
Matsui
N
Montgomery
N
Murtha
N
Natcher
N
Peterson (MN)
N
Pickett
ROLL NO. 205
DEMOCRATIC -
NAYS
-
-
AuCoin
-
de la Garza
- Foley
- Jacobs
-
Smith (IA)
- Whitten
ROLL NO. 205
DEMOCRATIC -NOT VOTING -
Y
Ballenger
Y
Gilman
Y
Miller (WA)
Y
Barton
Y
Gingrich
Y
Molinari
Y
Bentley
Y
Goodling
Y
Moorhead
Y
Boehlert
Y
Green
Y
Morella
Y
Broomfield
Y
Gunderson
Y
Porter
Y
Bunning
Y
Hancock
Y
Pursell
Y
Burton
Y
Hefley
Y
Ramstad
Y
Coble
Y
Henry
Y
Ravenel
Y
Coughlin
Y
Herger
Y
Regula
Y
Cox (CA)
Y
Hobson
Y
Ridge
Y
Cunningham
Y
Horton
Y
Riggs
Y
Dannemeyer
Y
Hyde
Y
Ritter
Y
DeLay
Y
James
Y
Rogers
Y
Dickinson
Y
Kasich
Y
Rohrabacher
Y
Doolittle
Y
Klug
Y
Ros-Lehtinen
Y
Dornan (CA)
Y
Kyl
Y
Roukema
Y
Duncan
Y
Lagomarsino
Y
Santorum
Y
Edwards (OK)
Y
Lewis (FL)
Y
Saxton
Y
Emerson
Y
Machtley
Y
Schaefer
Y
Fish
Y
McCollum
Y
Schiff
Y
Gallegly
Y McEwen
Y
Schulze
Y
Gallo
Y
McGrath
Y
Sensenbrenner
Y
Gilchrest
Y
McMillan (NC)
Y
Shuster
ROLL NO. 205
REPUBLICAN
-
YEAS
-
Y
Smith (NJ)
Y
Smith (TX)
Y
Snowe
Y
Solomon
Y
Spence
Y
Stearns
Y
Taylor (NC)
Y
Upton
Y
Walker
Y
Walsh
Y
Weldon
Y
Wolf
Y
Zeliff
ROLL NO. 205
REPUBLICAN
-
YEAS
- CONTINUED
N
Allard
N
Franks (CT)
N
McCandless
N
Archer
N
Gekas
N
McCrery
N
Armey
N
Gillmor
N
McDade
N
Baker
N
Goss
N
Meyers
N
Barrett
N
Gradison
N
Michel
N
Bateman
N
Grandy
N
Miller (OH)
N
Bereuter
N
Hammerschmidt
N
Morrison
N
Bilirakis
N
Hansen
N
Myers
N
Bliley
N
Hastert
N
Nichols
N
Boehner
N
Holloway
N
Nussle
N
Callahan
N
Houghton
N
Oxley
N
Camp
N
Ireland
N
Packard
N
Campbell (CA)
N
Johnson (CT)
N
Paxon
N
Chandler
N Johnson (TX)
N
Petri
N Clinger
N Kolbe
N
Quillen
N
Coleman (MO)
N Leach
N
Rhodes
N
Combest
N Lent
N
Rinaldo
N
Crane
N
Lewis (CA)
N
Roberts
N
Davis
N
Lightfoot
N
Roth
N
Dreier
N Livingston
N
Shaw
N
Ewing
N
Lowery (CA)
N
Shays
N
Fawell
N
Marlenee
N
Skeen
N Fields
N Martin
N
Slaughter (VA)
ROLL NO. 205
REPUBLICAN
-
NAYS
-
N
Smith (OR)
N
Stump
N
Sundquist
N
Thomas (CA)
N
Thomas (WY)
N
Vander Jagt
N
Vucanovich
N
Weber
N Wylie
N
Young (AK)
N
Young (FL)
N Zimmer
ROLL NO. 205
REPUBLICAN -
NAYS
- CONTINUED
- Hopkins
- Hunter
- Inhofe
ROLL NO. 205
REPUBLICAN -NOT VOTING -
MCDONNELL DOUGLAS
McDonnell Douglas Corporation
RONALD K. SABLE
Staff Vice President, Legislative Affairs
July 2, 1991
The Honorable Jim Dyer
Deputy Assistant to the President
The White House
Washington, D.C. 20500
Dear Jim:
As we discussed, MFN status is important to McDonnell
Douglas, but it is also the right thing to do.
Enclosed is a copy of a recent letter from our
chairman, together with a list of recipients. We are working
it hard. Let me know how I can help.
Sincerely,
Car
RKS:ec
Enclosures (2)
members
copy of JFM 24 June 1tr
list
Ini of Senate/House the list recipients covers knows well lants countries like and Lugan n
the other chairman letters have been
/
sprinfic
1735 Jefferson Davis Highway, Suite 1200, Arlington, VA 22202, (703) 553-3805
MCDONNELL DOUGLAS
McDonnell Douglas Corporation
24 June 1991
JOHN F. McDONNELL
Chairman and Chief Executive Officer
The Honorable Max Baucus
United States Senate
Washington, D.C. 20510-2602
Dear Senator Baucus:
Over the past several weeks, I have been asked to explain the impact of the
President's extension of Most Favored Nation (MFN) trade status to China on
McDonnell Douglas, our employees, and our current business activities in the PRC.
Clearly, the impact is significant, and McDonnell Douglas strongly supports the
President's recent decision to extend MFN trade status to China without additional
conditions.
Our support of the President's decision is derived from the following: Adding
more conditions to China's MFN trade status will have an adverse impact upon our
company's ability to continue existing programs with China; it will hamper our
ability to compete for future programs; and it will slow the dynamic exchange of
ideas with the Chinese people.
McDonnell Douglas involvement with the PRC goes back to 1975 when we
submitted our first proposal to the Chinese government for co-production of our mid-
size MD-80 commercial transport. After years of extensive review and negotiations, a
license and co-production agreement was signed in April 1985. In July 1987,
McDonnell Douglas and Shanghai Aviation International Corporation delivered the
first of 25 MD-80 aircraft to be assembled in the Shanghai facility.
This cooperative venture, worth approximately $1 billion, still represents the
largest U.S.-China technology program. both in dollar value and technology content.
To date, 22 aircraft have been delivered from Shanghai, and the Chinese recently
contracted for 10 additional MD-80 kits. In addition to our MD-80 program, China
Eastern Airlines has placed firm orders for five MD-11 aircraft which will be
produced at our facility in Long Beach, California.
McDonnell Douglas is also involved in negotiations with key Chinese officials
to develop a 150-aircraft program for China's domestic airline system. This initiative,
known as the Trunk Aircraft program, will be a follow-on to our existing MD-80 co-
production program and will extend over a 10-year period. It has a potential export
value of approximately $7 billion to the United States.
Given our extensive activity with China, our reasons for supporting China's
MFN trade status become clear. First, I believe that adding conditions to MFN renewal
will make long-term planning virtually impossible for American businesses
operating in China. Conditions could place all future McDonnell Douglas business in
China in jeopardy. The investment vacuum created by American companies'
withdrawal from the Chinese marketplace will surely be filled by European and
Japanese companies looking for inroads into that vast market.
P.O. Box 516, Saint Louis, MO 63166-0516 (314)232-7503
Senator Baucus
Page 2
24 June 1991
Secondly, denial of MFN trade status will increase tariffs on aircraft
components imported into the United States from China. This will increase our
manufacturing costs by $75,000 to $100,000 per aircraft, which will hamper our
competitiveness in the global market. Last year, American aerospace was
responsible for $26 billion in exports, and a continuation of this positive balance of
trade is predicated on America's ability to compete with the heavily subsidized Airbus
consortium.
Finally, I am convinced that trade is an effective means of keeping the doors
of China open to Western ideas and values. I believe that trade with the West has
played a significant role in the tremendous change that has occurred in China the
past decade.
In closing, I ask that you support the President's initiative to extend MFN
trade status to China and oppose additional conditions. Please feel free to call me or
our Washington office (703-553-3801) if you have additional questions.
Sincerely,
John
Officer
McDonnell Douglas Corporation
Senator Max Bacus
Senator Lloyd Bentsen
Senator Christopher "Kit" Bond
Senator David L. Boren
Senator Hank Brown
Senator Dale Bumpers
Senator Alan Cranston
Senator John C. Danforth
Senator Dennis DeConcini
Senator Christopher J. Dodd
Senator Wyche Flower, Jr.
Senator Jake Garn
Senator John Glenn
Senator Bob Graham
Senator Phil Gramm
Senator Orrin G. Hatch
Senator Richard G. Lugar
Senator Connie Mack
Senator John McCain
Senator Howard M. Metzenbaum
Senator Frank Murkowski
Senator Don Nickles
Senator Sam Nunn
Senator David Pryor
Senator John Seymour
Senator Timothy E. Wirth
Rep. Bill Alexander
Rep. Glenn M. Anderson
Rep. Michael A. Andrews
Rep. Jim Bacchus
Rep. Howard L. Berman
Rep. Jack Brooks
Rep. Ben Nighthorse Campbell
Rep. William L. (Bill) Clay
Rep. E. Thomas Coleman
Rep. Jerry F. Costello
Rep. Christopher Cox
Rep. Bill Emerson
Rep. Elton Gallegly
Rep. Richard A. Gephardt
Rep. Mel Hancock
Rep. James V. Hansen
Rep. Joan Kelly Horn
Rep. James M. Inhofe
Rep. John R. Kasich
Rep. Jon Kyl
Rep. Mel Levine
Rep. Bill Orton
Rep. Wayne Owens
Rep. John J. Rhodes, III
Rep. Dana Rohrabacher
Rep. J. Roy Rowland
Rep. Ike Skelton
Rep. Bob Stump
Rep. William M. Thomas
Rep. Harold L. Volkmer
Rep. Alan Wheat
North American Export Grain
NAEGA
Association Incorporated
PREPARED STATEMENT OF STEVEN A. MCCOY
PRESIDENT
NORTH AMERICAN EXPORT GRAIN ASSOCIATION
before the
SUBCOMMITTEE ON TRADE
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
June 12, 1991
1030 15th Street, N.W., Suite 1020
Washington, D.C. 20005
.
(202) 682-4030 Telefax: (202) 682-4033
PREPARED STATEMENT OF STEVEN A. MCCOY
PRESIDENT
NORTH AMERICAN EXPORT GRAIN ASSOCIATION
before the
SUBCOMMITTEE ON TRADE
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
June 12, 1991
INTRODUCTION
The North American Export Grain Association (NAEGA) takes this
opportunity to join U.S. agriculture's voice together with the many
other interests represented here today in strong support of the
President's decision to renew most favored nation (MFN) trade
status for the People's Republic of China (PRC). NAEGA is the
national association of U.S. grain and oilseed exporting companies
and cooperatives.
Few issues that the Congress will address this year will have
as immediate and direct an impact on U.S. agriculture as the issue
before the Committee today. The PRC represents U.S. agriculture's
11th largest market, with total sales in excess of $2.2 billion
since 1989. U.S. wheat sales to China since 1989 have topped $1.5
billion; PRC purchases in 1989 represented fully 20% of all U.S.
wheat exported that year. The PRC is a major market for U.S.
commodities such as cotton, corn and forestry and tobacco products.
In addition, agriculture-related exports of fertilizer and paper
accounted for an additional $1.2 billion in sales in the period
1989 to the present.
Sales of these agricultural and related commodities and
products have traditionally been among the largest trade categories
in our bilateral trade with the PRC and accounted for 37% of all
U.S. exports to the PRC in 1989. These exports would be imperilled
-- and could be lost altogether -- if PRC MFN status is denied or
otherwise circumscribed by the Congress, such as some currently
propose.
PRC RETALIATION AGAINST U.S. FARM EXPORTS LIKELY
PRC retaliation in the event of disruption of MFN status
should not be considered a matter in doubt. Retaliation against
U.S. exports will almost certainly and immediately follow such
action. The only question, therefore, is the nature and severity
of the retaliation; and against whom in the United States the
retaliation will be directed.
1
Past PRC retaliation against the U.S. in major bilateral trade
disputes has historically (and disproportionately) been directed
against U.S. farm exports. As previously indicated, U.S.
agricultural sales to the PRC currently are among our Nation's
leading exports to that country. Consequently, such sales present
the most substantial and likely target for retaliation in response
to unilateral U.S. government action designed to disadvantage or
damage PRC commerce in the U.S. market.
U.S. AGRICULTURE HAS LONG-TERM STAKE IN PRC MARKET
The PRC market represents one of American agriculture's best
future long-term growth potential markets. The PRC's share of
world gross national product (GNP) has grown rapidly in recent
years. Its share of total world population (21% in 1988) alone
makes its long-term future a vital concern to U.S. agriculture.
The dual impact of rising income and population has the
potential to substantially fuel PRC demand for U.S. agricultural
commodities and products well into the next century. Basic
commodity production in the PRC (including wheat, corn, millet,
potatoes and soybeans) has levelled off at approximately 380 to 390
million metric tons (MMT) during the decade of the 1980s. At the
same time, demand for basic food and feedstuffs has grown
dramatically.
The U.S. share of this growing market would be arrested, and
could be extinguished altogether, if normal bilateral trade is
disrupted. The result would be to offer up this market to our
trade competition, particularly to European Community (EC)
countries, Australia, Canada, Argentina, and other agricultural
exporting nations.
U.S. agriculture has, over a decade of hard-won sacrifice in
the direction of greater global competitiveness, earned a right to
unrestricted access to the PRC market. Furthermore, the Chinese
people themselves have a right to the rising standard of living
their imports of U.S. agricultural commodities and products allow.
Denial or disruption of MFN status would be a betrayal of trust
with our Nations' farmers and exporters and progressive elements of
the Chinese people alike. It would not, in our view, serve in any
fashion to modify the policies of the PRC government. Indeed, if
history is judge, it may result in a hardening, and not a
softening, of current PRC government attitudes.
DENIAL OF PRC MFN A DE FACTO GRAIN EMBARGO
Regarding sanctions, there is no middle ground. Advocates of
conditionality applied to PRC MFN status must understand that this
policy is not risk-free or cost-free or without potential penalty
to the United States. The penalty to U.S. agriculture could be
2
severe and long-lasting. Indeed, disruption of MFN may be
tantamount to imposition of a unilateral U.S. grain embargo against
the PRC if, as expected, the PRC retaliates through suspension of
its imports of U.S. farm commodities and products.
U.S. agriculture's past bitter experience with grain embargoes
imposed to achieve foreign policy objectives should be argument
enough for avoidance of similar action with respect to PRC MFN.
Unilateral trade sanctions rarely work. More often than not, they
fail to achieve their intended objective at a cost of substantial
hardship for affected domestic U.S. interests.
The 1980 grain embargo against the USSR resulted in a loss of
perhaps $11 billion in value to the U.S. economy. It reduced U.S.
export sales and lowered farm prices. It undermined confidence in
the United States as a dependable supplier and encouraged the
Soviets to seek alternate sources of supply from U.S. competitors
in the international marketplace.
Denial or disruption of MFN status to the PRC, if followed by
PRC agricultural import restrictions directed at the U.S., would
have all the same serious ramifications for American agriculture.
It would serve the interests of our trade competition. It would
deny the U.S. the leverage provided by on-going amicable trade
relations. It would undermine Chinese confidence in the United
States as a reliable trading partner and diminish the U.S. role in
the PRC market at the very moment that market presents the greatest
possible future potential for U.S. agriculture.
CONCLUSION
We should seek to avoid the mistakes of the past. MFN status
for the PRC should not be used as a tool to achieve U.S. foreign
policy objectives.
Denial or disruption of MFN would not result in a modification
of PRC government policy. Indeed, the adverse economic impact of
that action would be felt greatest by those elements of the PRC
population least capable of bearing the brunt of the interruption
in trade. These elements are, not by accident, the very elements
within the PRC economy who have been most instrumental in advancing
the goals of liberalization and democratization which we in the
United States have so strongly supported. It would a mistake to
turn our back on them -- and the Chinese people in general -- at
this significant juncture in our evolving relationship with the
PRC.
We have attempted in this testimony to express agriculture's
many concerns regarding possible denial of MFN status to the PRC
and the potential impact of such action on U.S. agriculture. The
potential costs involved are great; the potential benefits
questionable at best.
3
Congress should resist efforts to deny MFN status to the PRC.
Trade should be held free of threat of sanction and our long-term
relationship with China allowed to develop and grow, in the best
interests of both our Nation and the Chinese people.
We have attached to this testimony a copy of a recent CRS
study which analyzes the likely impact of PRC retaliation in the
event of denial or disruption of MFN. The study predicts a
substantial loss in farm income, a rise in government agricultural
spending, and a declining market share for U.S. commodities in
world markets. We concur with these findings; and offer the report
as further evidence to be considered by the Committee and Congress.
I am happy to answer any questions you may have.
4
91-447 ENR
May 29, 1991
CRS Report for Congress
Congressional Research Service The Library of Congress
China's Most-Favored-Nation Status: U.S. Wheat Exports
Susan B. Epstein
Specialist in Agricultural Policy
Environment and Natural Resources Policy Division
SUMMARY
On May 27, 1991, President Bush announced that he intends to renew
China's Most-Favored-Nation or MFN¹ (nondiscriminatory) trading status
under the provisions of the freedom-of-emigration (Jackson-Vanik) amendment.
If recommended by the President, such renewal is automatic and does not
require specific congressional approval. It can be blocked, however, by the
enactment of a joint resolution of disapproval considered under a special fast-
track procedure, which must be completed within about 3 months. The
Congress can also restrict or deny outright MFN status to China by specific
legislation considered under regular procedure. Some Members are calling for
such action because of China's human rights violations in recent years and
because China has been selling nuclear technology to countries such as Pakistan
and Algeria. (For more details on denial procedure, see IB90107.)
Some trade experts contend that China may retaliate by prohibiting imports
from the United States if MFN is denied this year. While China is a major
market for a wide array of U.S. products, it is especially important for U.S.
agriculture, particularly wheat. In the past 3 years, wheat amounted to between
60 and 92 percent of China's agricultural imports from the United States.
Furthermore, China is often among the largest importers of U.S. wheat, buying
as much as 20 percent of total U.S. wheat exports in some years.
As Congress debates whether or not to support the extension of MFN
status to China, an examination of possible effects of the outcome of this debate
on the U.S. wheat sector might be useful.
BACKGROUND
China is considered a major U.S. agricultural export market, although its
rank fluctuates widely from year-to-year. For example, in 1986, it ranked 60th;
the next year, it ranked 17th. In 1989 China was the eighth largest foreign
market for U.S. agricultural exports, purchasing more than $1.4 billion worth
'Most-Favored-Nation status means that trade privileges or concessions that
the United States grants to any nation would automatically apply to the MFN
country.
CRS
CRS Reports are prepared for Members and committees of Congress
CRS-2
of products. Just last year, China ranked 11th among U.S. foreign agricultural
markets, importing about $800 million worth of agricultural products.
China imports an array of agricultural goods including wheat, corn,
soybeans, cotton, livestock products, horticultural products, even wine and
tobacco from the United States each year. Wheat, by far, makes up the largest
portion of U.S. agricultural exports to China. In 1990, wheat accounted for
more than 60 percent of U.S. exports to China; in 1989, it accounted for 80
percent; and in 1988, it accounted for 92 percent. The type of wheat China
typically imports from the United States is high quality protein wheat such as
hard red spring or winter wheat for use as flour for bread and other baked
goods.
U.S. wheat exports often make up a large portion of China's market share;
for example, U.S. wheat exports held more than 30 percent of China's market
share in 7 out of the past 10 years. However, on a year-to-year basis, both
quantity of wheat exports and U.S. market share of China's wheat market
fluctuate significantly. This supports the claim by some agricultural economists
that the United States is a residual supplier of wheat to China. (See figure 1.)
China has participated in two U.S. agricultural export promotion programs
in recent years--the Export Enhancement Program (EEP) and the Targeted
Export Assistance (TEA) program. China has never imported U.S. commodities
under the export credit guarantee programs (GSM-102 and GSM-103), although
it is eligible to participate in both. China's eligibility to participate in the P.L.
480 concessional sales program has not yet been established by the
Administration.²
Since 1987, when China first became eligible for EEP commodities, it has
imported more than 17.5 million metric tons of EEP-subsidized wheat. The
Targeted Export Assistance (TEA) program, currently named the Market
Promotion Program (MPP), has promoted in China more than $2 million worth
of exports of wheat, feed grains, plywood, seeds, table grapes, ginseng, meat and
meat by-products, tobacco, and wine.
THE U.S. WHEAT SECTOR AND EXTENDING CHINA'S MFN STATUS³
A best case scenario for the wheat sector includes the assumption that
China's MFN status will be extended, and China will continue buying U.S.
2Congress gave the President authority to designate China as a "friendly
country" and determine if China satisfies the criteria for participating in P.L.
480's Title I program. U.S. Congress. Senate. Report of the Committee on
Foreign Relations, International Security Enhancement Act of 1982, 97th
Congress, 2d Session, May 28, 1982, pp. 38-39.
3Some of the estimates in this section were calculated by the WEFA Group,
a consulting firm located in Bala Cynwyd, Pennsylvania. For this analysis, years
referred to in this section are wheat crop years-July/June years.
CRS-3
wheat. So far this year, the United States has shipped a total of 3.8 million
metric tons of wheat to China.4
A worst case scenario is based on the assumption that China is denied MFN
status this year and will retaliate by not importing any wheat from the United
States. For the purpose of this analysis, the loss of U.S. wheat export sales was
set at 4.2 million metric tons (or about 155 million bushels), which is the long
run average of China's wheat imports from the United States. Important to
note is that other wheat producing countries currently have wheat carryover
stocks that are sufficient to fill China's lost supplies from the United States, if
China chose to reject U.S. wheat exports altogether. (See figure 2.) Thus, while
trading patterns would likely change over time, worldwide wheat export and
import patterns would not have to change in the current year.
Figure 1
US Wheat Exports to China
Volume & Market Share
9
70
8
60
7
50
6
Million Tonnes
40
5
+
+
4
+
30
3
20
Percent of Market
2
10
1
0
0
80
81
82
83
84
85
86
87
88
89
90
Exports
Mkt. Share
Source: Agriculture Service, The WEFA Group, May 17, 1991.
⁴Telephone conversation with Renee Schwartz, Grain and Feed Division,
Foreign Agricultural Service, USDA, May 20, 1991.
CRS-4
Figure 2
Wheat Carryover Stocks
Selected Competitors
35
30
25
Million Tonnes
20
15
10
5
0
87
88
89
90
EC-12
Canada
Australia
Source: Agriculture Service, The WEFA Group, May 17, 1991.
CRS-5
According to WEFA analysis, in the worst case scenario, the U.S. wheat
sector would experience a net loss of 89 million bushels in sales over the best
case scenario. Export sales would decline by 137 million bushels, but domestic
sales would increase by 48 million bushels, since the lower export demand would
result in a reduction in wheat prices. The loss of exports amounting to 137
million bushels is less than the 155 million bushels assumed to be lost in sales
to China, because other foreign markets would import more than they otherwise
would have due to lower wheat prices. (See table 1.)
If China refuses to buy U.S. wheat, the resulting weaker demand and larger
U.S. stocks could combine to reduce U.S. wheat prices. (In contrast, however,
world wheat prices may rise initially, since closing China's market off from the
U.S. supply would effectively raise demand for non-U.S. wheat and reduce the
world supply.) The U.S. wheat price is estimated to drop by 27 cents per bushel
or about 10 percent from the levels expected in the best case scenario. In
addition, psychological effects of losing one of our biggest foreign wheat markets
might push prices down even further in future time periods.
U.S. wheat ending stocks would drop from year earlier levels in either
scenario. In the best case of renewing China's MFN status, the 1991/92 wheat
stocks are expected to drop by 267 million bushels from 1990/91 levels. In the
worst case scenario of not extending MFN and loss of the China wheat market,
wheat ending stocks are expected to drop by 178 million bushels.
Reduced wheat sales and lower prices would reduce farm cash receipts and
aggregate farm income. Income of wheat producers that participate in price
support program (80 percent) would be supported by Government deficiency
payments. Therefore, Government costs would increase if China refused to
purchase U.S. wheat. Because of the triple-base feature of the 1991 program,
wheat farmers would lose income from the marketing of wheat from
nonpayment acres at the lower wheat price. Other crop farmers might face
more competition if, in the next crop year, wheat farmers plant other crops such
as soybeans and cotton, causing the price of those commodities to decline.
It is possible to estimate potential Government and farm losses if wheat
prices were to have dropped last year by 27 cents per bushel. If this worst case
scenario had occurred last year, based on USDA's 1990 U.S. wheat production
level estimates of 2,739 million bushels, and using USDA's estimates that 80
percent of wheat acreage was covered under the wheat program, the potential
increased cost to the Government in deficiency payments might have been as
much as $592 million in that crop year. Furthermore, wheat farms might have
lost an additional $148 million in market receipts last year. Therefore,
estimates of the worst case scenario using 1990 wheat production data result in
a total Government and wheat sector cost estimate of more than $740 million.
Although 1991 production levels and program participation data currently are
unavailable, and wheat farmers may make decisions and adjustments over the
crop year that would change this scenario somewhat, the above calculations
suggest the potential losses that might be attributed to denying China MFN
status.
CRS-6
Table 1
Wheat Situation
1991/1992
million bushels
With
Without
Most Favored Nation
Most Favored Nation
Beginning Stocks
893
893
Production
2105
2105
Total Supply
2998
2998
Domestic Use
1214
1262
Exports
1158
1021
Total Use
2372
2283
Ending Stocks
626
715
Kansas City Price
3.17
2.90
Farm Price
296
2.69
Source: Agriculture Service, The WEFA Group, May 17, 1991.
North American Export Grain
NAEGA
Association Incorporated
June 11, 1991
The Honorable Dan Rostenkowski
Chairman, Committee on Ways and Means
1102 Longworth House Office Building
Washington, DC 20515
Dear Congressman Rostenkowski,
The North American Export Grain Association (NAEGA) -- representing the Nation's grain
and oilseeds exporting companies and cooperatives -- takes this opportunity to urge you to support
the President's decision to unconditionally extend most favored nation (MFN) status to the People's
Republic of China (PRC).
Neither denial nor conditional extension of PRC MFN, such as currently being advocated
in Congress, would, in our view, have any serious impact on domestic policies of the PRC
government, while it would almost certainly have dire consequences for U.S. industries dependent
on U.S.-PRC trade. U.S. agriculture has accrued in excess of $2 billion in export earnings from PRC
purchases of U.S. agricultural commodities and products in the last two years alone. These exports,
especially important to our Nation's wheat farmers and exporters, would almost certainly be lost
if PRC MFN status is denied or otherwise constrained by legislative action.
We in agriculture have taken great faith and comfort in past assurances that U.S.
agricultural trade will be held safe from the threat of embargo or suspension; and by pledges made
not to use food as a foreign policy weapon. We ask the Congress to stand by these principles in
the matter of future U.S.-PRC trade. Suspension of PRC MFN status could threaten progressive
elements of the PRC economy and society, and would be equally injurious to Hong Kong interests.
Furthermore, such action would represent a virtual gift of markets to our trade competition at the
very moment the U.S., through the GATT process, seeks to expand U.S. trade opportunities
throughout the globe.
We understand that the problems posed by this issue for non-agricultural U.S. interests are
easily as serious as those threatened for U.S. agriculture. For all interests potentially threatened,
we urge you to support the President in his desire to unconditionally extend PRC MFN status. Such
a policy is, in our view, necessary to ensure the maintenance of stable, long term trade with the
PRC.
We thank you for your consideration of this matter. With warm regards in behalf of the
Officers, Directors and Members of the North American Export Grain Association,
Sincerely,
Steven A. McCoy
President
1030 15th Street, N.W., Suite 1020
Washington, D.C. 20005
(202) 682-4030 Telefax: (202) 682-4033
NATIONAL SECURITY COUNCIL
July 15, 1991
FOR: MIKE ANDRICOS
JIM DYER
STEVE FARRAR
BILL MACKAY
FROM: DOUG PAAL
Enclosed is State's draft of the
response to the Baucus letter which
has been approved by Secretary Baker.
Comments please.
Doug
5746
FOR MIKE ANDRICOS AND JIM DYER:
Doug is traveling for the next two
weeks and has left me a note to hold on
to this response (when it's final) until
the two of you say to move it.
Cindy
X5746
Withdrawal/Redaction Sheet
(George Bush Library)
Document No.
Subject/Title of Document
Date
Restriction
Class.
and Type
05. Letter
To: Senator Baucus From: President Bush
n.d.
(b)(1)
S
Re: China's MFN Status (8 pp.)
Collection:
Record Group:
Bush Presidential Records
Office:
Legislative Affairs, White House Office of
Series:
Dyer, James W., Files
Subseries:
WHORM Cat.:
File Location:
China MFN [4]
Date Closed:
9/24/2012
OA/ID Number:
08451-008
FOIA/SYS Case #:
2012-1098-F
Appeal Case #:
Re-review Case #:
Appeal Disposition:
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AR Case #:
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AR Disposition:
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financial information [(a)(4) of the PRA]
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information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA]
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personal privacy |(a)(6) of the PRA]
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SEN1 BY:ine TICKET CENTER
7-15-91 4:15PM LEGISLATIVE AFFAIRS-
2024500221,A 2
07/15/91
15:14
202
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. BOBOS
July 15, 1991
(Senate)
STATEMENT OF ADMINISTRATION POLICY
(Tam STATEMENT HAS - COORDINATION BY OMB WITH THE CONCERNED ASSIGNME.)
S.J.Res. 153 - Resolution of Disapproval of the President's
Decision to Extend NEW to China
(Granston (D) California)
S. 1367 :States-chine Act of 1991
(Mitchell (D) Maine and 24 others)
The Administration strongly opposes S.J.Res. 153, which would
deny China most-favered-nation (MFN) trade status, and B. 1367,
which would place additional conditions on MFN renewal. If
either of these bills is presented to the President, his senior
advisors will recommend a vato.
The President extended China's MFN waiver because ne determined
that China net the legal requirements under the Jackson-Vanik
amendment and that continuing HFN would serve broad U.S. economic
and foreign policy interests and promote reform in China. over
the past year, China has continued its ralatively open emigration
policy. Extension of MFN substantially promotes U.S. freedom or
emigration and travel objectives, and its withdrawal would place
at risk the substantial gains already achieved in these areas.
Extension of MPN is also important for promoting reform in China.
Foreign trade keeps China open to the outside world and supports
the economic forces that are driving domestic political and
social change and endouraging a loosening of state control and
more personal freedom. Millions of Chinese depend on a healthy
commercial relationship to justify business and social contacts
with the United States. MFN withdrawal would hurt all Chinese,
but would hurt most those Chinese, particularly in the market-
oriented coastal provinces, who have the greatest stake in
coonomic reform.
A fundamental pillar of our relationship with the Chinese people,
MFN is essential if va are to stay engaged with China on a broad
range of issues, including human rights, nonproliferation, prison
labor exports, and trade. Eliminating MFN would seriously crode
our ability to influence Chinese behavior on these issues. It
would also hurt U.S. exporters and consumers, and undermine
confidence in Hong Kong where the United States has substantial
economic interests.
SENT BY:The TICKET CENTER
; 7-15-91 ; 4:16PM ; LEGISLATIVE AFFAIRS-
2024565221;# 3
07/15/91
15:15
203
3
Conditional renewal is not acceptable because it would make China
less likely to respond to U.S. concerns. Hardline Chinese
leaders would claim that national honor and sovereignty preclude
any concessions to the United States. Imposing new conditions
for renewal would, in effect, hold our single most powerful
instrument for influencing China -- trade and the openness which
it brings -- hostage to the reactions of the Chinese Government.
Where particular issues are unresolved and the Chinese are not
forthcoming, the President has the tools necessary to pursue U.S.
interasts in a targeted fashion. MFN's withdrawal is the wrong
tool because of its indiscriminate impact and adverse effect on
all Chinese, particularly those who continue to seek reform. The
Administration believes that MFN should be renewed
unconditionally now on its own merits, as the most effective
means for influencing China's behavior on a range of U.S.
interests.
*****
NOTAVISITY
OKLAHOMA
JACK KELSEY, President
TERRY DETRICK, Vice President
FARMERS
RAY SCHILTZ. Secretary
UNION
EDUCATION
"The Voice of Family Farmers since 1905"
July 2, 1991
The Honorable David Boren
United States Senate
453 Russell Office Building
Washington, D. C. 20510
Dear Senator Boren:
Recently during a meeting of the Executive Board of Directors of the National Farmers
Union, they voted to go on record strongly supporting the extension of the most-favored
nation treatment to China.
I know that you are aware that China has been this nation's largest buyer of wheat
the past two years. Much of that wheat has been hard red winter, the kind grown in
Oklahoma. Last week China bought one million tons of wheat in a single day. This
is the largest "single day" sale of wheat to any country and Oklahoma's share of that
sale could amount to $16 million or more for Oklahoma producers.
For wheat farmers, the loss of that Chinese market would mean a reduction in wheat
prices of about .27 cents per bushel and 150 million bushels of lost export sales. Other
commodities as well as industries with export sales and business interests in China
would be hit in similar fashion.
I must agree that China has not done much to win friends and influence people, especially
those in Congress who have a big role in the MFN decision-making process. We all
remember the vivid television images of the military's assault on students in Beijing's
Tiananmen Square which put the issue squarely in the middle of our living room.
I think I must agree with President Bush and the U.S.-China Business Council, that
more contact with China, not less, is the practical way to bring about greater freedom
and respect for human dignity in China.
I am reminded a few years ago after working so hard to get Russia in the market to
buy our wheat. That was taken away with the stroke of a pen, when President Carter
put an embargo on sales to Russia. That of course was because Russia had invaded
Afghanistan. The only ones that were hurt was the American farmer. They just went
somewhere else and bought their wheat, and that is what China will do. We have
the most to lose.
The decision you make is going to be hard, but please take all of these things into
consideration.
Sincerely
Jack Lelry Jack Kelsey
President
JK/sm
6200 Northwest Second Oklahoma City. OK 73127 (405) 789-5666
Ma
Address.
P C
Bc.
24000
Oklahoma Wheat
800 N.E. 6313 OKLAHOMA CITY, OKLAHOMA 73:03
Commission
PHONE: 405/521-3796 FAX 405-543-0372
June 27, 1991
SENT TO ALL OKLI
The Honorable David L. Boren
United States Senate
Washington, D. C. 20510
CongressioNAL DEL.
Dear Senator Boren:
The Oklahoma Wheat Commission is deeply concerned abs at the future
of trade relations with China. Oklahoma wheat growers have much EL
stake in this important market.
On June 20, 1991, China bought one million metric tons of U. S.
wheat under the Export Enhancement Program. The sale set a record
as the largest single transaction under the export bonus program.
China is the largest buyer of U. S. whest and the second largest
customer for Oklahoma wheat (behind the Soviet Union). In 1990,
U. S. wheat sales to China accounted for $511 million in trade and
made up 178 of American wheat exports.
According to the Congressional Research Service, the Chinese wheat
trade has d 27 cent per bushel impact on U. S. wheat growers. We
desperately need this market in light of the current depressed
conditions in the wheat industry.
China stopped buying U. S. wheat in 1983 after walking away from a
protracted dispute with the U. S. over textile imports. That
boycott of U. S. wheat lasted three years.
The Chinese could easily abandon the purchase of U. S. wheat again.
Canada, Australia, Argentina and the European Community have ample
supplies of wheat and could easily make it available to replace
U.S.wheat.
As Congress debates the issue of China's trade status, we ask you
to keep in mind the importance of this market =0 Oklahoma wheat
producers.
Working Ch-Nt cronger wheat industry,
Chris Rink
Executive Director
CR:jw
This was
PB
sent 10 all
OKLAHOMA FARM BUREAU
2501 N STILES OKLAHOMA CITY. OK 73105-3196 (405) 523-2300
Congressmon
June 26, 1991
The Honorable Jim Inhofe
United States House of Representatives
408 Cannon House Office Building
Washington, D C 20515
Dear Jim:
The farmer and rancher members of the Oklahoma Farm Bureau strongly
support extension of non-discriminatory most-favored nation (MFN)
tariff treatment to China.
Withdrawal of MFN tariff treatment would halt all U.S. imports from
China and result in Chinese retaliation against American farm
commodities. Our agricultural exports to China were valued at over
$800 million in 1990 and included livestock products, wheat and cotton.
As you can see by the commodities involved, this is an issue that is
extremely critical to Oklahoma. Our state needs the nearly $1 billion
in business, mostly in wheat, with China. China is the largest
purchaser of wheat from the United States. China is also the second
largest purchaser of Oklahoma wheat, behind the Soviet Union.
Last week, China bought one million tons of wheat in a single day.
Reportedly, this is the largest "single day" sale of wheat to any
country and Oklahoma's share of that sale could amount to $16 million
or more for Oklahoma producers.
Application of prohibitive tariffs would not allow Chinese products to
compete with the vast majority of other countries in the U.S. market
and would virtually end all trade between the two countries. This may
be the main objective for some opponents of MFN.
We certainly do not condone the political repression that-exists in
China, but withdrawing MFN is not the answer to that problem. If the
United States applies discriminatory tariffs against Chinese goods,
China will discriminate against the United States in its purchases of
agricultural products. American farmers will once again be used as a
political weapon in our government's trade policy.
We appreciate your thoughtful consideration in this matter.
Sincerely,
Jim James L. Lockett
President
Where belonging makes a difference!
OKLAHOMA FARM BUREAU
250' N STILES. OKLAHOMA CITY OK 73105-3196 (405) 523-2300
June 26, 1991
The Monorable David Boren
United States House of Representatives
SR 433 Russell Senate Office Building
Washington, D C 20510
Dear David:
The farmer and rancher members of the Oklahoma Farm Bureau strongly
support extension of non-distriminatory most-favored nation (MEN)
tariff treatment to China.
fithdrawal of MFN tariff treatment would halt all U.S. imports from
China and result in Chinese retaliation against American farm
commodities. our agricultural exports to China were valued at over
$800 million in 1990 and included livestock products, wheat and cotton.
IS you can see by the commodities involved, this is an issue that is
extremely critical to Oklahoma. Our state needs the nearly $1 billion
.n business, mostly in wheat, with China. China is the largest
purchaser of wheat from the United states. China is also the second
argest purchaser of Oklahoma wheat, behind the Soviet Union.
ast week, China bought one million tons of wheat in a single day.
Reportedly, this is the largest "single day" sale of wheat to any
country and Oklahoma's share of that sale could amount to $16 million
I more for Oklahoma producers.
pplication of prohibitive tariffs would not allow Chinese products to
ompete with the vast majority of other countries in the U.S. market
nd would virtually end all trade between the two countries. This may
@ the main objective for some opponents of MFN.
e certainly do not condone the political repression that exists in
hina, but withdrawing MFN is no: the answer to that problem. If the
nited States applies discriminatory tariffs against Chinese goods,
hina will discriminate egainst the United States in its purchases of
gricultural products. American farmers will once again be used as a
olitical weapon in our government's trade policy.
e appreciate your thoughtful consideration in this matter.
incerely,
ames L. Lockett
resident
ENID BOARD OF TRADE
OKLAHOMA GRAIN AND FEED ASSOCIATION
OKLAHOMA FERTILIZER AND CHEMICAL ASSOCIATION
OKLAHOMA SEED TRADE ASSOCIATION
2308 N 10th
P O. Box 1747
EMID. OKLAHOMA 73702
PM. 405-233-1828 - 405-233-8816
FAX 405-237-2131
June 28, 1991
The Honorable David L. Boren
453 Russell Senate Office Building
Washington, D.C. 20510
Dear Senator Boren:
This letter is being written on behalf of the 400 plus members and
the employees of the above organizations regarding the debate over
China's Most-Favored-Nation status,
I an sure you realize the sense of deep economic depression that
exists within the Oklahoma grain industry. Here in Enid, one-half
the 80 million storage capacity is closed and the facilities for
sale. The number of firms operating in Enid has gone from seve.
to five, with the real possibility of four by year's end. He
estimate that over the past two years, there are approximately 154
to 20% fewer Oklahoma grain firms due to mergars, consolidations,
and closings. On top of this is the fact that we have just
experienced a very short wheat harvest, with most country
facilities receiving anywhere from 40% to 70% of their normal
receipts. The Enid terminals are only 15% full.
Às you no doubt know, the china MFN status is of significant
economic importance to not only oklahoma agribusiness, but to the
entire state agricultural community as well. China has been E
significant buyer of hard red winter wheat over the past two years.
with U.S. exports at low levels and a glut of wheat world wide,
this business has been most beneficial to our Oklahoma farmers and
agribusiness entities. such continued trade with China it
extremely important to Oklahoma agriculture, especially during
these difficult economic times.
We realize there are differences on 2. number of issues with the
Chinese. Howaver, to believe that the United States acting alone
can change their thinking as a direct result of the denial of MES
status and other economic and trading senctions is wishful thinking
at best. Denying MFN statue to the Chinese will drastically herm
the Oklahoma economy while == the same time do very little to
chance
Page 2
Senator David L. Buren
Keeping the lines of communication open with the Chinese via MFN
status in an excellent vehicle for the United states to achieve
changes in their human rights, &175 sales, and other internal
policies. Shutting the door, both politically and economically,
will hurt us much more than it will them.
Oklahoma agriculture is teetering on the economic edge of serious
financial difficulties. Please do not "push us over the edge" by
restricting MFN status with China.
Most sincerely,
Jane doe N.
Hampton
General Manager and Executive Vice President
JNH/gw
Oklahoma
ommission
NEWS
FOR ADDITIONAL INFORMATION, CONTACT.
CHRIS RINK, EXECUTIVE DIRECTOR 405/521-2706
Oklahoma farmers are in a "must win" situation on the international
trade front. Oddly, the battle is in Washington, D.C. where
Congress is considering the President's request for an
unconditional renewal of Most Favored Nation trade status for
China, America's biggest wheat customer.
In 1990, U.S. wheat sales to China accounted for $511 million in
trade and made up 17% of American wheat exports. During the sere
psriod, China was the second largest customer for Oklahoma whese
(behind the Soviet Union). This year, China will likely be
Oklahoma's biggest buyer.
On June 20, 1991, China made the largest single one day purchase of
U.S. wheat under the Export Enhancement Program. According to
Chris Rink, Executive Director of the Oklahoma Wheat Commission,
Oklahoma's share of that sale could amount to $16 million or more.
Oklahoma farmers have much at stake in trade relations with China,
Concern over the future of these relations has mobilized Oklahoma
farm and agribusiness groups to communicate their support for China
MFN treatment.
Cn June 22, 1991, the National Fermers Union voted to support the
approval of MFN for China at their Executive Board Meeting,
according to Jack Kelsey, President of the Oklahoma Farmers Union
and Vice-Prasident of the National Farmers Union.
James L. Lockett, President of the Oklahoma Farm Bureau, in a
letter to Washington said, "If the United States applies
discriminatory tariffs against Chinese goods, China will
discriminate against the United States in its purchases of
agricultural products. American farmers will once again be used as
a political weapon in our government's trade policy."
It's unfortunate that we get trade policy and foreign policy
intertwined, was the sentiment expressed by David Gammill,
President of the Oklahoma Wheat Growers' Association. It's e sad
thing when we adopt policies offering questionable improvement, but
damage done in this country by those same policies is certain.
William R. Allen, Jr., President and Chief Executive Officer of
Union Equity Cooperative Exchange, offered the following in a
letter to Washington, "If MFN is denied or made SO conditional that
it is tantamount to denial, the unfortunate truth is that those at
whom our bullets are fired won't be hit; our bullets will hit
curselves and other unintended targets, both economically and
diplomatically. And on the economic front, Oklahoma agriculture
stands to be wounded badly."
The Enid Board of Trade and Oklahoma Grain and Feed Association's
Joe Neal Hampton expressed, "Denying MFN status to the Chinese will
drastically harm the Oklahoma economy while at the same time do
very little to change their policy on internal affairs. They can
simply go elsewhere for their wheat business."
According to Scott Dewald, Executive Director of the Oklahoma
Agricultural Cooperative Council, which represents cooperatives and
their owner members, "Denying Most Favored Nation status to China
could lead to China's refusal to purchase American farm products
and thus would have a large negative impact on Oklahoma's wheat and
cotton producers and the Oklahoma economy. If this market can't be
made up somewhere else then we will see higher costs for domestic
farm programs and job losses (estimated at 22,500) due to a fewer
number of people required to move the products. Granting MFN to
China is crucial not only to Oklahoma producers but to the Nation's
consumers as well."
Congress is considering a number of measures which might deny or at
least restrict MFN treatment. However, Chinese authorities have
made it clear that restrictions are unwanted and will invite
retaliation.
Wheat farmers well remember when China stopped buying wheat in 1983
after a trade dispute involving textiles. That boycott of U.S.
wheat lasted three years.
The Chinese could easily abandon the purchase of U.S. wheat again.
Canada, Australia and the European Community have record supplies
of wheat and could easily make it available to replace U.S. wheat.
None of these countries, nor any of China's other trading partners,
are currently considering revoking China's MFN status.
The MFN or Most Favored Nation trade status desired by China really
only allows for normal trade relations. In fact, the only
countries not currently enjoying MFN relations with the U.S. are:
Afghanietan, Albania, Bulgaria, Cube, Kanpuchee, Laos, Mongolia,
North Korea, Romania, the Soviet Union, and Vietnam.
A recent Congressional Research Service report estimates wheat
prices would plunge 27 cents per bushel if China refuses to buy
U.S. wheat. The report suggests that the long-term effect may be
even worse due to the negative effect on the markets of losing
America's top foreign wheat buyer.
All the Oklahoma groups which have supported China's MFN status
have acknowledged concern over Chinese policy in a number of areas.
But, these groups raise doubt over the influence of trade relations
on Chinese internal policy.
The US-China Business Council, a trade association of firms with
business interests in China, suggests withdrawal of MFN would
destroy or severely weaken a significant force for reform in China.
According to the Council, Chinese hardliners would have a ready-
made reason to blame the U.S. for any economic hardships. "We
tried to change China's behavior with sanctions in 1950 and the
Soviet Union sought to bring China to its knees in 1959," the
Council recalls. "China's response in each case was to tighten its
belt, suppress all dissent and unite the country."
Oklahoma farmers have a great deal at stake in the debate over
China's MFN status. The U.S. has been an active exporter of wheat
to China since the normalization of relations in the late 1970's.
Chinese imports of American wheat have increased steadily
throughout the 1980's, averaging 180 million bushels per year. In
1989, China became the largest importer of U.S. wheat. It has
maintained its rank as our number one customer since then and
promises to remain a major customer for U.S. wheat through the end
of the century, barring any disruption in current trade flows.
-30-
WBJOHNSTON
CRAIN LOMPANV
GRAIN FEEDS. SEEDS, FERTILIZER
MEMBER
411 WEST CHESTNUT
END BOARD OF TRADE
OFFICE PHONE
P.O. BOX 1307
GRAIN AND FEED DEALERS NAT. ass
OKLA GRAIN ANC FEED ASE
405/233-5800
ENID. OKLAHOMA US A. 73702
T.E CMA
June 26, 1991
The Honorable David Boren
United States Senate
Washington, DC 20510
Dear Senator Boren:
Our 1991 wheat harvest is virtually complete, and I am sure
you are aware that we had a short crop with very poor
quality. we always like to have rain, but the untimely
rain during harvest this year did not help our grain quality
any.
I noticed that there was still some debate in Congress on
whether or not to support the President's effort to give
Chine Most Favored Nation status. I would encourage you
to support the President on giving them MFN, with no quirks
added. Even though we have had a short crop in Texas,
Oklahoma and Kansas on hard red winter wheat and the quality
is poor, the price is even worse and continues to decline.
I believe that without Most Favored Nation status to China,
it would be like putting a grain embargo on U.S. wheat,
when it is already depressed.
I would be happy to supply you with any information you
may need that would be helpful in making this decision.
I hope that you support President Bush in his efforts.
Sincerely,
Lew
Lew Meibergen
LM:jn
Guthrie Corporation
P. O. Box 429
GUTHRIE, OKLAHOMA 73044
FAX
(403) 282-4450
PHONE
(405) 282-4400
June 27, 1991
The Honorable Don Nickles
U.S. Senate
713 Hart Senate Office Bldg.
Washington, D.C. 20510-3602
Honorable Don Don Nickles:
I am writing to urge you to support the Most Favored Nation status for
China. AS an exporter of agricultural products I feel it is important that WE
keep Crina as 2 customer to whom the U.S. can export.
I: would appear to ME that it would be ill advised to withhold MFN status
from the Chinese for their behavior in the human rights area. First, in my
opinion they would not change their ways in the human rights area because of our
withholding of MFN. Secondly, we already have a growing trade deficit with the
Chinese which will only grow larger if we withhold MFN.
For the acove reasons I urge you to support MFN with China during the
current debate in Congress.
Yours very truly,
John John C. Pearson
1776 Lincoln St., Suite 1200
Driver CO 80203-1029
FAX: (303) 860-1439
Phone: (303) 831-7411
Colorado Association of
Commerce and Industry
July 1, 1991
The Hon. Hank Brown
U.S. Senate
717 Hart Office Building
Washington, D.C. 20515
Dear Hank:
As the Senate is nearing a vote, I urge you to support extending Most Favored
Nation Status to China.
I believe extending MFN status is most important to business here. Dropping the
status could adversely affect Colorado's acrospace and agricultural industries as well as
others. Thousands of jobs and billions of dollars in exports are at stake nationwide.
in China.
Americans would pay much higher prices for items which are now produced inexpensively
It is obvious that the United States wants political reform in China, and doing
business with democratic countries such as the U.S. will encourage political and economic
reform in China faster than will pulling out Only our European and Japanese competitors
would benefit.
I appreciate your consideration and hope you will vote to continue MFN status.
Sincerely,
George George S. Dibble Jr.
President and CEO
GSD/a
1/75 Lincoln St., Suite 120
Denver, CO 80203-1029
FAX (303) 360-1439
Phone: (303) 837-7411
Colorado Association of
Commerce and Industry
July 1, 1991
The Hon. Timothy Wirth
U.S. Senate
380 Russell Office Building
Washington, D.C. 20515
Dear Tim:
Nation Status to China.
As the Senate is nearing a vote, I urge you to support extending Most Favored
I believe extending MFN status is most important to business here. Dropping the
status could adversely affect Colorado's acrospacc and agricultural industries as well as
others. Thousands of jobs and billions of dollars in exports are at stake nationwide.
in China.
Americans would pay much higher prices for items which are now produced inexpensively
It is obvious that the United States wants political reform in China, and doing
business with democratic countries such as the U.S. will encourage political and economic
would benefit.
reform in China faster than will pulling out Only our European and Japanese competitors
I-appreciate your consideration and hope you will vote to continue MFN status.
Sincerely,
President G and CEO
George S. Dioble Jr.
GSD/a
NEW MEXICO POTASH
C 0 A P 0 R A T I O N
July 1, 1791
The Honorable Pete V. Domenici
United States Senate
434 Dilksen Senate Office Bldg.
washington, DC 20510
Dear Senator Domenici:
This is to urge your support of extending Most Favored Nation
trade status with the People's Republic of China, and to oppose
Senator Mitchell's proposal to put conditions on MFN renewal.
While we know that there is a crying need for human rights reform
and more demonstrable movement toward democracy in China, we feel
that placing the proposed conditions on MFN would effectively
terminate that status. This in turn would allow one of our large
trading partners and the largest foreign market in the world to
revert to the sort of policies that allowed repression to thrive.
This would jeopardize US exports of fertilizers, agricultural
products and implements and aircraft.
A market oriented industrial base is thriving and growing in
Southern China where workers producing goods for export to the US
enjoy better wages and a higher standard of living. This free
enterprise movement would disappear to the detriment of the free
world if MFN were removed. We also feel termination of MFN would
have a downside effect on Hong Kong, one of our most reliable
trade partners.
The uncertainties wrought by the proposed conditions would result
in a number of US companies pulling out of China and at home we
would see a significant increase in the cost of low priced
consumer goods now imported from China, like footwear, -elothing
and toys.
Unilateral trade sanctions are an ineffective weapon, generally
hurting only the sanctioning nation.
For these reasons we urge you to back unconditioned MFN status
for China.
Very truly yours,
Walt3Ca.j Walter Case, It.
General Manager
WSC/bt
THE WHITE HOUSE
WASHINGTON
July 11, 1991
MEMORANDUM FOR JAMES DYER
886
FROM:
STEPHEN P. FARRAR
WARREN MARUYAMA
SUBJECT:
China MFN
Cal Cohen of the Emergency Coalition for American Trade
(ECAT), a key business lobbying organization, called yesterday
to report on a meeting with Senator Hank Brown. According to
Cohen, Brown's primary complaint was that the Administration is
not doing enough on market access. Brown said that the lack of
action on trade is the principal reason he may vote with
Senator Mitchell.
In our judgment, the USTR portions of the draft Baucus
letter should fully address any concerns about market access
and trade, as long as the Special 301, self-initiated 301, and
Taiwan GATT initiatives stay in the package.
Accordingly, if this has not occurred already, it might be
useful for you to meet with Brown, listen to his market access
concerns, and promise to see whether they can be addressed. If
so, Brown would feel that the Administration has been
responsive and could take credit for whatever is in the
package.
CC. Doug Paal
NATIONAL SECURITY COUNCIL
July 15, 1991
FOR: MIKE ANDRICOS
JIM DYER
STEVE FARRAR
JOSH BOLTEN
BILL MACKAY
FROM: DOUG PAAL
Background papers from State arrived
after Doug's bootleg copy of the
letter, and are attached for your
review. Sorry this came in two
separate packages.
Cindy
X5746
1. all
2. Bancus/ brighing
Background Attachments:
Part I - Trade and Economic Issues
Part II - Nonproliferation
Part III - Human Rights
7/8/91 1850
CONFIDENTIAL
DRAFT
(Final version to be provided k
NSC)
PART I: TRADE AND ECONOMIC ISSUES
The Administration is committed to achieving with China the same
goals that have guided our trade policy with all other countries.
We seek open markets and the opportunity for U.S. firms and their
products to compete on fair and equal terms. To achieve these
goals, and realize the principles of equality, mutual benefit and
non-discrimination set forth in the U.S.-China Bilateral Trade
Agreement, this Administration has pursued a policy of
negotiation and engagement on trade issues with China. In
particular, the Administration has sought to improve U.S. access
to China's marketplace; to bolster Chinese protection of
intellectual property; to end fraudulent practices by Chinese
textile exporters using false country of origin declarations;
and, to induce Beijing to undertake the economic and trade
reforms required for membership in the GATT.
Reciprocal MFN tariff treatment underpins our ability to work
constructively with the PRC. China's desire to retain access to
the U.S. market has enabled us to engage Chinese leaders in
periods of tension. We believe that discontinuing MFN, or
attaching conditions to its renewal, would cause serious harm to
our trade interests and erode our ability to influence China's
behavior on key trade issues.
A. The Past Decade of Bilateral Trade Relations
After decades of adhering to an import-substitution strategy that
focused on minimizing China's reliance on outside sources of
machinery and equipment, in the 1980's China has sought outside
sources of these goods. It also has increasingly drawn on
foreign technology, expertise, and funds by actively encouraging
joint ventures.
China's opening to the outside world has helped transform its
economy, bolstering reform-oriented sectors that are not directly
controlled by the central government. For example, the state
sector now produces just over half of China's industrial output;
in 1978, its share was 78 percent. China's dynamic rural
industries, which are privately and collectively owned, have
burgeoned. The 30,000 foreign-invested ventures China now has
are valued at $40 billion. The impact of China's opèn door has
been particularly pronounced in coastal areas, where 90 percent
of the foreign investment and more than three-fourths of China's
trade activities are located. This region, in turn, has become
the primary engine of economic reform in China largely as a
result of the introduction of market concepts to Chinese
employees of joint ventures and to citizens engaging in
commercial exchanges with the West. The economic autonomy
fostered by this interaction contributes to increased political
and even individual self-determination.
DECLASSIFIED
PER NSC WAIVER, 1500 2021-02
CONF IDENTIAL
By SS NARA, Date
6/20/25
Declassify on : OADR
CONFIDENTIAL
DRAFT
The United States has been a vital partner in this
transformation. Following Congressional approval of the
bilateral trade agreement, the United States and China
established formal trade relations and reciprocally granted most-
favored-nation (MFN) status in 1980. Growth in our commercial
ties has helped to change China and to bring it into the global
trading system. Since the resumption of normal trade relations,
U.S.-China two-way trade has increased almost 770 percent, from
$2.3 billion in 1979 to over $20 billion last year.
-- We are now China's second-largest trade and investment
partner and its largest export market.
-- China is our tenth-largest trade partner, up from fifteenth
in 1981.
--
Over 1,000 U.S. firms have invested more than $4 billion in
China and another $5 billion in Hong Kong related primarily
to trade with the PRC.
--
In 1990, the United States exported $4.8 billion worth of
goods to China, including:
--
$749 million worth of aircraft
--
$544 million worth of fertilizer
--
$512 million worth of grain
--
$281 million worth of cotton yarn and fabric
--
$264 million worth of electric machinery
--
$238 million worth of wood and wood pulp
--
$238 million worth of chemicals
--
$227 million worth of scientific instruments.
Commercial relations with the United States have exerted positive
influences on China's business and economic practices since 1980.
China has shifted away from total reliance on a strongly
centralized economy; shown greater tolerance for experimentation
with market mechanisms to regulate its domestic economy; and
decentralized and liberalized its foreign trade practices.
B. Regression in China's Trade Policies
China's opening to the outside world has not been smooth. Over
the past decade, attempts to accelerate the implementation of
market-oriented reforms have been followed by Beijing's
recentralization of control, as concern about the country's
ballooning trade deficit led Beijing to step in to regain some of
the trade authority it had relinquished.
Moreover, throughout the period since the normalization of trade
relations and the granting of reciprocal most-favored-nation
trading status in 1980, China's web of barriers to imports has
made it difficult for many U.S. exporters to gain access to the
Chinese market. U.S. firms have also had difficulty securing
protection for their intellectual property.
CONF IDENTIAL
CONFIDENTIAL
DRAFT
U.S. trade negotiators have long been engaged with the Chinese
Government, both in bilateral negotiations and in multilateral
consultations at the GATT held to review China's application for
membership. We have sought to ensure that bilateral commercial
relations develop in accord with the principles that underlie our
bilateral trade agreement: equality, mutual benefit, and
nondiscrimination. From 1979 through 1987, Chinese authorities
made some progress in dismantling nontariff barriers to imports,
in improving transparency, and in protecting the intellectual
property of foreigners.
This trend has been reversed over the last three years.
--
Since 1988, Chinese trade policies and practices have become
more protectionist, nontariff barriers to imports have
proliferated, and the trade system has become less
transparent. These policies undoubtedly contributed to a 17
percent decline in U.S. sales to China in 1990. China was
the only major foreign market for U.S. goods and services in
which our exports declined in 1990.
--
Despite intensive bilateral negotiations with Chinese
authorities since the USTR in 1989 placed China on the
"priority watch list" of countries providing inadequate IPR
protection--including three rounds of meetings over the past
five months--China has failed to live up to the commitments
contained in the bilateral Memorandum of Understanding (MOU)
signed in May 1989.
At the same time, other problems have developed in our bilateral
trade relationship. For example, to bypass U.S. textile and
apparel quotas Chinese exporters have increasingly resorted to
shipping these products to the United States via third countries
using false invoices and counterfeit visas. Also of concern to
us has been the apparent lapse in China's commitment to economic
and trade reforms that would bring the country in line with the
GATT's free-trade principles. China's reassertion of central
control over the past few years has called into question its
willingness and ability to undertake the obligations that would
be required of China as a contracting party to the GATT.
C.
Steps the U.S. Government Has Taken and Will Take to
Address Bilateral Trade Problems
In four key areas of our bilateral trade relations, the
Administration has taken steps to resolve trade problems.
prepared to do more.
On Market Access
Beginning in the fall of 1990, the Administration resumed
sub-cabinet level meetings with the Chinese, that had been
suspended since June 1989, to secure Chinese actions to
reverse the growing list of new protectionist measures.
CONF IDENTIAL
CONFIDENTIAL
DRAFT
In May 1991, the Administration formally set in motion a
market access initiative that commenced with the visit to
Beijing, in mid-June, of an interagency delegation to
discuss market access issues. In meetings with senior
Chinese officials, U.S. Government officials raised nine
types of market access barriers, including: the lack of
transparency in rules and regulations; the expansion of
import licensing requirements; the use of import
substitution policies; the proliferation of import bans and
quotas; the growth of standards, testing, and certification
requirements, including discriminatory "quality standards"
procedures for imports; the high level of many import
tariffs; the unnecessary use of certain phytosanitary
regulations; the uncertainties regarding government
procurement and tendering regulations; and the lack of
information regarding China's major development projects.
The Administration has proposed holding another round of
market access consultations in August 1991. If that round
of negotiations fails to yield substantial commitments from
the Chinese authorities to dismantle market access barriers,
the Administration will self-initiate Section 301 action to
address those barriers the removal of which offers the most
potential for achieving U.S. trade policy objectives and
increasing U.S. exports.
On Intellectual Property Protection
--
On April 26, 1991, USTR identified the PRC as a priority
foreign country that denies adequate and effective
protection of intellectual property rights.
Accordingly, on May 26, 1991 USTR initiated a Special
Section 301 investigation on the basis of four problem
areas: (1) inadequate copyright protection, (2) inade
patent protection, (3) inadequate trade secret protection
and (4) ineffective enforcement of trademarks.
Consultations with the Chinese are ongoing. The first round
of consultations occurred in mid-June and a second has been
proposed for August.
The deadline for making a determination under Section 301 is
November 26, 1991. This may be extended for three months if
China is making substantial progress in drafting or
implementing measures that will provide adequate and
effective protection of U.S. intellectual property rights.
At that time, the USTR must determine whether the acts,
policies and practices of the PRC are actionable under
Section 301 and what retaliatory action, if any, is
appropriate.
CONFIDENTIAL
DRAFT
CONFIDENTIAL
5
If the consultations fail to produce adequate and effective
protection of intellectual property rights, the
Administration will take retaliatory action.
On Textile Transhipments
The U.S. Customs Service has been vigilant in documenting
cases of Chinese textile transhipments over the past year.
--
In August 1990, USTR held consultations with Chinese
authorities on the transhipment issue. Additional
consultations took place in November 1990, March 1991, and
May 1991.
The U.S. Government "charged" China's quotas for goods that
were sent to the United States under false country of origin
declarations valued at over $85 million.
China has begun to take actions to curtail textile fraud
since the December charges were made. For example, it
issued regulations prohibiting reexports through a third
country to countries that have signed textile agreements
with China. Further, the Chinese Government has issued
provisions for the punishment of those who violate the
regulations.
The Administration has prepared more charges valued at about
$14 million that we anticipate will be levied after
consultations with China next month.
The Administration will increase the number of U.S. Customs
officials dedicated to investigating circumvention.
If transhipment persists, we will be prepared to take
further action against China, beyond charging China's
textile quota the documented amount imported through
transhipment.
On Forced Labor
The importation of goods produced with forced, convict or
indentured labor is prohibited by 19 USC Section 1307, which also
directs the Secretary of the Treasury to prescribe regulations
for enforcement of the provision. The Secretary of the Treasury,
under 19 CFR Section 12.42, has delegated to the Commissioner of
:
Customs, authority to determine that a class of goods is the
product of forced labor and exclude those goods.
Customs has been investigating imports alleged to be the product
of forced labor in China. Customs has interviewed emigres about
forced labor practices in China. Customs is also analyzing
import samples to determine if they match the descriptions
provided by the emigres and others. Additional special agents
have been detailed to Hong Kong to assist in the investigation.
CONFIDENTIAL
DRAFT
CONFIDENTIAL
6
Although the letter from Senator Baucus and fourteen co-signers
did not specifically address the issue of prison labor imports,
appropriate action is called for to fulfill the intent of
existing law. The Administration therefore proposes to negotiate
a memorandum of understanding with China on procedures for the
prompt investigation of allegations that specific products
exports to the U.S. are being produced by prison labor.
Pending negotiation of the MOU, Customs will temporarily embargo
specific products from China when there is reasonable indication
that they are made by prison labor. Embargoes will be lifted
only after the Chinese Government or the Chinese exporter
provides credible evidence that the products are not produced by
prison labor.
Multilateral Lending to China
The G-7 consensus, led by the United States, was successful in
prohibiting all MDB lending to China from June 1989 to February
1990 in response to the international outcry against the
crackdown by the Chinese authorities at Tiananmen Square.
From February 1990 to July 1990, the G-7 consensus supported a
gradual resumption of World Bank lending to China for projects
that clearly met basic human needs (BHN) The consensus held
firm and actively prohibited other loans from Board
consideration. Only five loans (totalling $590 million) were
approved in WBFY 1990. This is substantially less that pre-
Tiananmen Square levels of World Bank commitments to china, which
were $1.4 billion in WBFY 1988 and $1.3 billion in WBFY 1989.
At the Houston Summit in July 1990, several G-7 countries decided
that China's long-term development needs argued for lending
outside the BHN limits favored by the U.S. Accordingly, the G-7
Houston Summit Declaration of July 1990 on MDB lending to China
expanded the boundaries of permitted MDB lending to China to
include loans which were environmentally beneficial or which
supported market-oriented economic reform. Only BHN loans were
considered by the World Bank Board until December 4, 1990 when
the market oriented economic reform loan for Rural Industrial
Technology was approved by the Board. On November 29, 1990, the
ADB approved its first loan to China since Tiananmen Square,
Agricultural Bank Project, which the U.S. did not support.
Since March 1991, infrastructure projects outside the Houston
summit guidelines (highways, power plants, bridges, and railways)
have been approved for China by the World Bank and the Asian
Development Bank. The U.S. has and will continue to withhold
support on all non-BHN loans at the Board. In WBFY 1991 (which
ended June 30, 1991), World Bank lending to China totalled $1.6
billion.
On GATT Accession
Since China applied for GATT membership in July 1986
United States has been a leading participant in the
CONFIDENTIAL
CONFIDENTIAL
DRAFT
collective efforts of major GATT Contracting Parties to
develop terms for China's GATT participation that will
support the objectives of the GATT and will influence
Chinese Government policies to become, over time, more
compatible with the GATT framework for world trade.
U.S. and other major GATT contracting parties' concerns
about China's ability and willingness to live up to GATT
obligations, particularly since June 1989, have stalled
progress in the Working Party established to consider
China's application for membership in the GATT.
The Administration intends to continue to press Beijing to
undertake trade and economic reforms so that its GATT
application can advance and its trade practices be brought
under GATT disciplines.
At the same time, the Administration will work actively with
other GATT members to resolve in a favorable manner issues
relating to Taiwan's GATT accession [and support the
formation of a Working Party for the commencement of
accession deliberations U.S. support for Taiwan's
accession as a customs territory would be consistent both
with GATT legal criteria and the "one-China" policy which
acknowledges the Chinese position and has been adhered to by
successive U.S. Administrations.
--
Taiwan's GATT accession would yield substantial trade and
commercial benefits to the United States and to the
international trading system.
--
Taiwan has indicated that it is prepared to accede to
the GATT as a developed economy, to bind virtually all
its tariffs, and to join the major non-tariff measure
GATT codes.
D. The Importance of MFN
As highlighted above, the Administration is aggressively seeking
to resolve outstanding bilateral trade issues with the PRC. MFN
underpins our ability to work constructively with the PRC. We
believe that discontinuing MFN, or attaching conditions to its
renewal, would cause serious harm to our trade interests, and
would render futile pursuit of the initiatives outlined above.
It would reduce our leverage in market-access, intellectual
property rights protection, and other trade-related negotiations.
China's desire to retain access to the U.S. market has enabled us
to engage Chinese leaders in consultations on bilateral and
multilateral issues even during periods of tension. Because
China is not a GATT member and not bound by GATT trade
disciplines, it is especially important to have many levers that
enable us to engage the Chinese on trade issues.
It would hurt U.S. exporters. If the United Stated rescinds
China's MFN trading status, China will not only discontinue MFN
CONFIDENTIAL
CONE IDENTIAL
DRAFT
tariff treatment for the United States, but would likely cease
purchasing billions of dollars of U.S. wheat, aircraft,
fertilizer, cotton yarn and fabric, wood and wood pulp, electric
machinery, scientific equipment, and chemicals. Foreign
competitors, whose goods would be subject to lower tariffs, would
be quick to exploit our departure. Lost shares of China's market
would not easily be regained even if MFN were restored at some
future date.
It would hurt U.S. consumers. Tariffs on the 25 most important
U.S. imports from China would rise from the present average
tariff rate of 8.8 percent to an average rate of 50.5 percent.
These increases would mean sharply higher prices for lower-end
Chinese goods. The costs to U.S. consumers would be largely
borne by poorer Americans, who are primary consumers of low-cost
Chinese products.
It would damage America's reputation as a reliable trade partner.
Our trade competitors will not join us in denying MFN status to
China. Other Chinese trade partners, especially in Asia, urge
that China's MFN status be retained.
It would hurt investors, businesses, and workers in Hong Kong.
Loss of MFN would impede China's integration into the regional
economy, a development crucial to regional stability particularly
as we near the 1997 deadline for Hong Kong's reversion to Chinese
sovereignty. It could cost over 43,000 jobs in Hong Kong and
result in direct revenue losses of approximately $1.2 billion
dollars. Hong Kong's GDP growth could be curtailed by as much as
two percentage points.
It would set back efforts to bring about meaningful economic
reform in China. A disproportionate burden of the MFN denial
would fall on the primary engine of economic reform in China--the
economies of the southern and coastal provinces. In Guangdong
province, for example, 40 percent of industrial output is
produced for export, half of which goes to the United States.
SEctors that fall outside of the direct control of the central
government have been especially important to China's development
as an exporter; one-third of China's exports currently come from
rural (individual and collectively owned) industries and from
foreign-invested ventures. The foreign ties these provinces and
non-state-owned factories developed with the outside world prior
to Beijing's reassertion of central control in mid-1989 enabled
these provinces to weather the austerity program; without these
foreign markets, Beijing's grip would have been all the tighter.
As Beijing's influence over the regions and sectors most closely
integrated into the global economy has diminished, these regions
and sectors have become increasingly sensitive to global economic
conditions. Revocation of China's MFN trading status would cause
unemployment to rise and factory losses to mount in export-
producing regions.
E. Conclusion
CONFIDENTIAL
CONFIDENTIAL
DRAFT
Those who engineered the violence in China in June 1989 are
unlikely to bear the economic costs associated with the denial of
MFN. Instead, those who suffer would be American businesses and
their employees, American consumers, and the people of Hong Kong
and the progressive areas of China.
China's opening to the outside world over the past decade has
accelerated growth in the non-state sectors of the economy;
resulted in strong links between China's coastal regions and the
global economy that have enabled this reformist region to weather
Beijing's periodic efforts to reimpose central government control
over economic activity; and introduced market concepts to a
generation of Chinese managers involved in joint ventures, trade
negotiations, and training in the West. For this process to
continue, China's most-favored-nation treatment in the United
States is essential.
CONFIDENTIAL
PART II:
ADMINISTRATION'S ACTIONS WITH RESPECT TO PROLIFERATION CONCERNS
We are engaged in a high-level dialogue with the Chinese that
began early in our relationship. Looking at the broad trends in
China's nonproliferation policy since normalization in 1979, it is
clear that our dialogue has paid off in important areas, demonstrated
by China's evolution toward international consensus on
nonproliferation in areas of great importance to us. For example,
China, which once held an antagonistic view of multilateral controls
on nuclear exports, joined the IAEA in 1984 and sent observers to the
Nuclear Nonproliferation Treaty Review Conference in 1990.
China's support for the Middle East arms control initiative is
another case in point. China's participation in the initiative is a
positive step that will strengthen international nonproliferation
efforts and indicates China's resolve to contribute to efforts to
attain stability in the Middle East. In addition, China's willingness
to participate in multilateral efforts to reduce tension in South Asia
will be crucial to establishing stability in that volatile region.
Moreover, we have seen Chinese arms sales restraint in some areas
of where we have vital interests. For example, to the best of our
knowledge, apart from the 1987/88 sale of missiles to Saudi Arabia,
China has not delivered medium-range missiles to the Middle East. It
is clear that in other specific cases China has taken international
concerns into account and declined proposed missile exports to
prospective buyers.
It is because serious concerns remain that we want to maintain a
constructive nonproliferation dialogue with Beijing. We do not intend
to ignore current problems, but isolating China by dismantling the
framework for our relations is not the way to advance our
nonproliferation objectives.
We have the means available to underscore our concerns where there
are differences in our approaches to nonproliferation and we have used
these legislative and executive branch tools. For example, we have
imposed trade sanctions mandated by the National Defense Authorization
Act on Chinese entities involved in missile-related activities. We
have also announced the Administration's decision that, pending
progress toward our nonproliferation objectives, we will not license
high speed computers and will not issue further waivers of legislative
restrictions on satellite exports. These new sanctions have been
imposed in addition to the existing sanctions announced immediately
following the June 1989 assault on Tiananmen and amplified by Congress
in the State Authorization Bill for FY90-91. Moreover, we have not
certified China under the bilateral agreement for nuclear cooperation -
that took effect in 1985.
Our policy mix of sanctions and cooperation at any given time is
necessarily dependent on Chinese behavior. We are encouraged by
China's indication in June that it is reviewing its policies with
respect to the Missile Technology Control Regime and the NPT. We seek
China's adherence to the NPT and the MTCR guidelines and will do all
we can to promote concrete steps toward Chinese adherence to the key
multilateral standards for international behavior established by these
institutions. The Administration will continue to use the legislative
authority that already exists and will take resolute action if the
Chinese do not address favorably our nonproliferation concerns.
PART III: HUMAN RIGHTS
Human rights concerns have been at the heart of our
relationship with the PRC since the tragic events of June
1989. Every high-level meeting since that time has at least
touched on human rights issues, and several -- such as the
December 1990 visit to China by Assistant Secretary Schifter --
have been devoted exclusively to them. We have consistently
stressed to the Chinese leadership that there can be no return
to the kind of relationship we enjoyed before 1989 without
substantial improvements in China's human rights practices.
Our overall approach on human rights issues has consisted of:
o
Public expressions of concern.
-- President Bush condemned the brutal suppression of
demonstrations in Tiananmen Square in June 1989, the
first world leader to do so. He declared May 13, 1990
a National Day in Support of Freedom and Human Rights
in commemoration of the 1989 demonstrations, and
issued another statement to mark the anniversary of
the crackdown in 1991.
-- In our human rights reports for 1989 and 1990, we
strove to be fair but hard-hitting, and as accurate as
available information would allow. These reports have
drawn high praise from human rights groups, and harsh
condemnations from the Chinese government.
-- The State Department issued a statement on January 9,
1991 condemning the trials of nonviolent dissidents.
-- In April 1991 the President met the Dalai Lama at the
White House to demonstrate our respect for His
Holiness' nonviolent approach to conflict resolution
and our concern for human rights problems in Tibet.
o
Suspension of bilateral programs. On June 6 and June 20,
1989, the President announced the suspension of a number of
bilateral programs and changes in U.S. approach to
multilateral issues until the human rights climate in China
improved. Those suspensions generally remain in effect.
-- A multitude of high-level exchange visits that would
normally have taken place since 1989 have been
canceled. Only a very limited number of visits at and
above Assistant Secretary level have been approved on
a case-by-case basis, and only when they addressed
issues of key concern to the U.S. like human rights,
nonproliferation, unfair trade practices and narcotics.
- 2 -
-- Military exchange visits have been suspended
completely.
-- Work on several existing military equipment and
technology projects has been suspended indefinitely.
-- We have stopped the transfer of military or dual-use
equipment or technology to Chinese military and
security services.
-- The U.S. sought to postpone all multilateral
development bank loans to China from June 1989 to
January 1990. Since then, we have supported only
those loans that serve the basic human needs of the
Chinese people.
-- We have suspended grants, loans and insurance
guarantees to China under the Trade and Development
Program and OPIC.
-- We have worked through COCOM to suspend planned
liberalization of export controls to China.
o
Engagement in dialogue. Through the few high-level visits
that have been authorized, and through regular diplomatic
channels, we have engaged the Chinese government in an
unprecedented continuing dialogue on a wide range of human
rights issues.
-- The Scowcroft-Eagleburgen missions of July and
December 1989 were devoted primarily to laying out our
human rights concerns and suggesting steps the Chinese
could take to address them.
-- During Chinese Foreign Minister Qian's visit to
Washington in November 1990, President Bush and
Secretary Baker reiterated the need for progress on
human rights, and stressed that human rights is a
cornerstone of American foreign policy.
-- Assistant Secretary Schifter visited China in December
1990, the first time our top human rights official has
done so. In 16 hours of intense discussions with
senior Chinese officials, he spelled out in detail our
human rights concerns in a wide range of areas
including accounting of detainees, release of
political prisoners, denial of due process and fair
and open trials, treatment of prisoners, divergence of
Chinese law from international standards, respect for
freedom of religon, abusive implementation of family
planning regulations, and human rights problems in
Tibet. He delivered a list of 151 representative
cases of reported political incarceration, and asked
Chinese authorities to clarify the status of the cases
- 3 -
and release those whose imprisonment violated
international norms. He suggested changes in Chinese
laws and judicial processes that would bring them into
conformity with international standards.
-- Under Secretary Kimmitt in May 1991 reiterated many of
the points made by Assistant Secretary Schifter, and
called on the Chinese government to declare an amnesty
for all those imprisoned for nonviolent political
activities. He also urged the Chinese to implement
effectively their claimed prohibition on export of
prison labor products.
These actions have produced results. Most importantly, the
Chinese government has acknowledged the legitimacy of human
rights as a subject of bilateral discussion, both with us and
with other concerned governments. They received a
Congressional delegation devoted exclusively to human rights
concerns in March 1991, and agreed to receive another later
this year. They also agreed to receive human rights
delegations to be sent by the governments of France and
Australia. In addition, they have taken a number of modest but
positive steps to improve the human rights situation in China:
Martial law was lifted in Beijing in January 1990 and in
Lhasa four months later. No part of China is currently
subject to martial law.
Most of those detained after the Tiananmen tragedy were
released by the end of 1989. Chinese authorities announced
the release of nearly 1000 more detainees in 1990, and
about 70 have been released so far in 1991. Officials
claim that only 21 still await trial detention in Beijing,
and at least one of these -- labor leader Han Dongfang --
has been released for medical treatment.
While at least 30 persons have been convicted on political
charges since the beginning of the year, the sentences
meted out to them were generally less severe than those
imposed on similar charges in previous years. Those
released without further punishment included prominent
dissidents such as essayist Liu Xiaobo, journalist Zhang
Weiguo, playwright Wang Peigong, and legal scholar Chen
Xiaoping.
Leading dissident Fang Lizhi and his wife, who had obtained
refuge in the U.S. Embassy in Beijing for over a year, were
allowed to leave China in June 1990, and are now at
Princeton.
Most investigations of those involved in the 1989 protests
have ended, and most of our Chinese contacts report that
the oppressive atmosphere of 1989 has lifted significantly.
- 4 -
The Chinese have ceased the most odious forms of harassment
of Chinese students and scholars in the U.S.; harassment
was a serious problem in 1989 and early 1990.
Relatives of many, though not all, overseas dissidents have
been allowed to leave China and join them abroad. In some
of the remaining cases that we have raised with Chinese
officials, passports have subsequently been issued.
Several released dissidents, including Tiananmen hunger
striker Gao Xin and former Arizona State student Yang Wei,
have been allowed to leave the country.
Chinese authorities have undertaken to stop the export to
the U.S. of products made in Chinese prisons. We will
continue to monitor this situation closely, but it appears
that the Chinese government is taking increasingly specific
steps to enforce their prohibition on export of these
products.
In response to concerns expressed by Administration
officials and Members of Congress, the Chinese have
provided useful new information on the status of persons
reported detained for religious activities.
Economic reforms have resumed, in some cases matching or
exceeding levels reached before 1989. Some limited
political reforms, in important but relatively
noncontroversial areas such as the personnel system, have
continued. An Administrative Procedure Law that became
effective in October 1990 for the first time enables
Chinese citizens to sue abusive officials.
There are indications that further progress may be in the
offing. We are continuing to press the Chinese government to
release all remaining detainees, to commute the sentences of
those nonviolent dissidents already convicted, and to allow the
departure of the remaining relatives of overseas dissidents who
wish to leave. We are hopeful that a combination of dialogue
and specifically targeted pressure will lead to further
movement on these and other remaining issues of concern. And
in the longer term, we are confident that the momentum toward
greater freedom and democratization in China, built up during
the decade of reforms and dramatically reflected in the 1989
demonstrations, will prove irreversible.
LLOYD BENTSEN. TEXAS. CHAIRMAN
PATRICK MOYNIHAN, NEW YORK
DOS PACKWOOD. OREGON
AUCUE. MONTANA
SON DOLE KANSAS
L BOREN. OKLAHOMA
WILLIAM V. ROTH. JR. DELAWARE
BRADLEY. NEW JERSEY
JOHN c DANFORTH MISSOURI
JAGE 1 MITCHELL, MAINE
JOHN H. CHAFEE RHODE ISLAND
MO PRYOR, ARKANSAS
JOHN HEINZ PENNSYLVANIA
DRALD W. RIEOLE, JR. MICHIGAN
DAVID DURENBERGER MINNESOTA
JOHN o. ROCKEFELLER tv. WEST VIRGINIA
WILLIAM L ARMSTRONG. COLORADO
Hnited States Senate
TOM DASCHLE SOUTH DAKOTA
STEVE SYMMS. IDAHO
JOHN BREAUX, LOUISIANA
COMMITTEE ON FINANCE
WASHINGTON, DC 20510-6200
YANDA a. MCMUNTRY, STAFF DIRECTOR AND CHIEF COUNSEL
EDMUND + MIHALEKI, MINORITY CHIEF OF STAFF
June 19, 1991
Dear Mr. President:
Congress will decide in the next few weeks whether to accept your
recommendation and extend most favored nation trade status to China.
We are writing to share our concerns.
In the debate over the appropriate U.S. policy towards China, one
thing is clear: China's behavior must change. The United States has
serious human rights and foreign policy concerns with China. Every
American remembers the vivid images of the Tiananmen massacre. In the
two years since Tiananmen Square, evidence of democratic reform has
been scant at best. We also have learned of Chinese sales of advanced
missiles to Syria and Pakistan, and of nuclear technology sales to
Algeria. There are credible reports that China has forced political
prisoners to produce goods for export to the U.S.
The United States also has serious economic concerns with China.
The U.S. Trade Representative's annual report on foreign trade
barriers lists ten pages of Chinese barriers. China maintains
restrictions including a preclusive licensing system, discriminatory
testing and certification standards, and outright import bans. China
also fails to protect U.S. intellectual property, resulting in
enormous losses to U.S. producers of films, books, chemicals and
pharmaceuticals. Moreover, the Administration has allowed China to
dictate U.S. policy towards Taiwan, declining to support Taiwan's GATT
application despite clear economic benefits to the U.S.
The United States cannot continue to tolerate Chinese
intransigence. We must tailor active responses to our wide ranging
concerns. But MFN is the wrong tool for the job. Revoking MFN would
not promote human rights in China. Instead, it would punish China's
most progressive regions and Hong Kong.
Revoking MFN also would hurt Americans. China is an important
market for U.S. goods ranging from wheat to airplanes. If MFN were
revoked, China almost certainly would retaliate against U.S. exports.
The Australians, Canadians, Europeans and Japanese are ready to fill
the void. No other country is contemplating cutting off China's MFN
status.
We believe the Administration must be more active in addressing
American concerns with China. You have taken meaningful steps in some
areas. You have moved to protect U.S. intellectual property under
provisions of the 1988 Trade Act. You also have taken steps to
restrict certain technology transfers to China in response to its
missile and nuclear sales. These steps are examples of the types of
actions the U.S. should take.
Page 2
June 19, 1991
We urge you to take appropriate actions in other areas. Human
rights is a foremost concern. Revoking MFN would be
counterproductive. But other steps can be taken. For example, the
U.S. could reinvigorate its opposition to multilateral loans for
China. The U.S. also could take strong action under U.S. law to
address China's unfair trade barriers and imports produced by prison
labor. In the area of nuclear and missile proliferation, the U.S.
could immediately negotiate for strict, multilateral technology
restrictions conditioned upon Chinese adherence to accepted
international standards. As for Taiwan, the U.S. could immediately
give strong support to Taiwan's GATT application.
These measures do not represent an exhaustive list. But it is
essential that the Administration take concrete steps. If Congress is
to extend China's MFN, we must see tangible evidence that the
Administration is taking action. We look forward to hearing your
response to our concerns.
Sincerely,
Max Bauces
Bui Ril
Nich Lugar
Air Brick
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