NCPA - National Center for Policy Analysis

Benefits Of Permanently Normalizing Trade With China

May 9, 2000

For the first time since the normalization of diplomatic relations with China 20 years ago, Congress is considering granting Permanent Normal Trade Relations (PNTR) to China. Between 1979 and 1989, Congress approved the President's extension of this status (then called "most favored nation" status) annually and without objection. However, throughout the 1990s, concern over human rights abuses in China, as well as threats to U.S. national security and Taiwan, prompted opposition to the extension of PNTR to China.

Experts say granting permanent normal trade relations to China would have a number of benefits for the U.S. and China.

Its most immediate and direct effect would be to force China to reduce its restrictive tariffs on U.S. goods, increasing access to China's large potential market. Thus,

  • China would have to reduce or eliminate protectionist barriers on imports of U.S. agricultural products -- and it would have to eliminate agricultural export subsidies.
  • Depending on the product, it would reduce its tariffs on U.S. products from 31.5 percent to between 14 percent and 17 percent.
  • Furthermore, trade between private parties would be allowed so that American businesses would no longer have to go through China's government and Communist Party-controlled state trading companies.
  • Professional services such as financial and business consulting, as well as travel and tourism-related services, would be able to operate in China, and geographic and customer restrictions on U.S. banks in China would be reduced or removed over a five-year period.

Additionally, PNTR would help further democratization by supporting the creation of a middle class. It would also facilitate accession to the World Trade Organization by China and Taiwan, improve the rule of law, and facilitate cross-Strait dialogue and contact, which would reduce tensions in the region.

Source: Larry M. Wortzel, Ph.D. and Stephen J. Yates, "Trade With China: How Trade with China Benefits Americans," Backgrounder No. 1367, May 5, 2000, Heritage Foundation, 214 Massachusetts Avenue, N.E., Washington D.C. 20002, (202) 546-4400.


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