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China Trade Bill Enacted

On October 10, 2000, President Clinton signed legislation extending permanent normal trade relations to mainland China. The bill (HR 4444) was passed by the Senate on September 19 by a vote of 83-15. Companion legislation was passed by the House on May 24 by a vote of 237-197.

Under current law, trade relations with China are reviewed and extended annually by an act of Congress. The legislation would eliminate that annual review and permanently extend China the same trading rights as most other nations. If enacted, the bill's provisions would become effective when China is admitted to the World Trade Organization, which is expected soon.

The bill is supported by the Clinton administration, most congressional Republicans, and business groups like the U.S. Chamber of Commerce and the Business Roundtable. It was opposed by most House Democrats and by unions, human rights advocates, and environmentalists. The bill's passage followed a November 1999 agreement reached between U.S. Trade Representative Charlene Barshefsky and Chinese Premier Zhu Rongji, who agreed to cut barriers to U.S. imports and investments in exchange for eliminating the annual review of China's trade status.

Proponents of the bill believe it will provide U.S. companies heightened access to 1.2 billion Chinese consumers and allow American companies to more easily establish production facilities in China. Opponents argue that it is more likely to cost American jobs than create them. The AFL-CIO points out that the tariff reduction on U.S. goods sold in China will be modest, with tariffs dropping from 17 to 10 percent. The liberal Economic Policy Institute estimates that the bill will cost 870,000 American jobs over the next decade.

Other, more neutral analysts say it is not likely to substantially affect the current trade balance with China one way or another. In 1998, the last year for which data is available, the U.S. ran a trade deficit with China of about $70 billion. The Chinese sold about $82 billion in good to the United States, while the U.S. exported only about $13 billion in goods to China. The International Trade Commission estimates that the U.S.-China trade deficit would have widened by about $1.7 billion if the November agreement had been effective that year.

There is also significant disagreement over the bill's potential impact on human rights and democracy in China. Opponents argue that the current annual review process provided some incentive for China to improve its human rights record. The bill's supporters point out that China has never actually been denied most-favored nation trade status under the current system, even after the Tiananmen massacre, and that increased trade will help spread Western values and lead to the closure of the inefficient, state-controlled factories that comprise much of the communist party's political base.

The bill contained a number of provisions to target some of the concerns of its opponents. It authorizes the president to increase tariffs and establish trade quotas if a surge in trade imports threaten U.S. industries, subject to the concurrence of the U.S. International Trade Commission. The U.S. Trade Representative would also be required to report annually on Chinese compliance with multilateral and bilateral trade agreements, and a new Human Rights and Labor Commission would monitor ongoing human rights and labor issues.

- 10/10/00

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