This year’s biggest trade battle is the congressional vote over Permanent Normal Trading Relations (PNTR) with China. PNTR is the key US action required to ensure American access to China’s market when China joins the World Trade Organization (WTO).
Much is at stake both in symbolic and practical terms. If opponents of normalized relations prevail, US firms will be denied the benefits negotiated by the US Government over 13 years. More broadly, the backlash camp will claim another impressive victory against globalization, after derailing fast track in 1997, frustrating plans for a Multilateral Agreement on Investment (MAI) in 1998, and disrupting the Seattle WTO ministerial in 1999. They could also delay the WTO aspirations of Taiwan, which is waiting in the wings to accede after China. If proponents carry the day, American firms will enjoy greatly enhanced export opportunities, and the global agenda of trade and investment liberalization will be reinvigorated.
In this policy brief we focus on the substance of PNTR, not its wider symbolic significance. A vote for PNTR will extend to China, on a permanent basis, the same trading rights that the United States grants every other WTO member. A vote against PNTR, or no vote at all, means that Congress will continue its annual review of Chinese policies, holding out the threat of imposing Smoot-Hawley tariffs on Chinese imports. As a consequence, the United States would miss out on the most valuable elements of China’s concessions: the nontariff liberalization. Wrangling would be required even to extract the tariff benefits from jilted Chinese negotiators. Broader US-China relations would dip precipitously as well, with adverse implications for the security climate in Asia.
