Clinton should renew China’s MFN trading status and support China’s re-entry into GATT this year

by Parliamentary Opposition Leader, DAP Secretary-General and MP for Tanjong, Lim Kit Siang, in Petaling Jaya on Thursday, 26th May 1994:

Clinton should renew China’s MFN trading status and support China’s re-entry into GATT this year

President Clinton of the United States should renew China’s most-favoured-nation trading status (MFN) and support China’s re-entry into General Agreement on Tariffs and Trade (GATT) this year to expedite China’s integration into the world economy, which would promote peace and stability in East Asia and the world.

Clinton’s withdrawal of MFN trading status to China would precipitate a multi-billion-dollar tit-for-tat trade war between China and the United States and might risk start Cold War II.

The MFN status is not as special as it sounds, as it is a privilege that Washington extends to almost all its trading partners.

MFN is simply the provision of normal trade status to another country. It confers basic membership of the international trading system by giving an assurance that the country will not discriminated against by giving special advantages to other countries.

Under the rules of GATT, Washington is basically obliged to offer its lowest possible tariffs to all other GATT members.

This is why Washington should be supportive of China’s application for re-entry into GATT this year, so that China could be a founder member of the new World Trade Organisation (WTO) to be formed out of Gatt, when the Uruguay Round agreement comes into force next year.

China was one of the 23 original contracting parties to GATT but left in 1949. It had been negotiating for eight years to rejoin GATT.

It is in the world’s interests as well as Beijing’s to ensure that China joined the World Trade Organisation at its inception as the WTO would be incomplete without a country con¬taining one-fifth of the world’s population and its 11th largest trading nation.

China’s accession to GATT would also resolve the annual problem of renewal or withdrawal of United States MFN status to China.

Depriving a country of MFN status is no ordinary sanction as it tantamounts to expelling the country from the international economic and political system.

Washington’s withdrawal of MFN status from China would have grave geopolitical, strategic and economic repercus¬sions.

It would jeopardise what has been described as China’s ‘legendary’ economic record over the past 15 years in registering an average nine per cent annual growth rate since 1978 while reworking its command. economy along market lines. In the proc¬ess, China has jumped 20 rungs from 31st in 1980 to become the 11th largest world merchandise trader – sixth if the European union is taken as one.

China now accounts for three per cent of world merch¬andise trade and total trade – imports and exports – last year rose by 18.2 per cent to US$195.8 billion.

Since MFN is reciprocal, the American withdrawal of MFN would lead to retaliation and the US Commerce Department had estimated that some 160,000 US jobs depend directly on exhorts to China.

American economy would also be badly affected as it would lose out in the vast China market, which planned to import one trillion dollars worth of goods before 2000.

Innocent Asian bystanders, foremost among them Hong Kong and Taiwan but also South Korea and South-East Asia would suffer from such a trade war.

Clinton should take serious note of the public appeal by the Governor of Hong Kong, Christopher Patten, that Hong Kong residents do not believe that withdrawing MFN is the best way to help human rights in China and his call for the renewal of MFN¬ status “for Hong Kong’s sake, Asia’s sake and from the point of view of long-standing US foreign policy objectives”.

The question of human rights, which is a legitimate matter of universal concern, should be delinked from trade. While the world has the right to expect improvement in the human rights situation in China, this should not be at the cost of sparking a world trade war.

This is why in 1989 and 1990, the DAP called on the United States not to withrdaw GSP privileges from Malaysia, although there were human sights violations and labour injustices in the country.