PNTR With China: Economic and Political Costs Greatly Outweigh Benefits

Publication Date: April 2000

Publisher: Economic Policy Institute

Author(s): Jeff Faux

Research Area: Economics; Trade

Type: Brief

Coverage: China

Abstract:

The Clinton Administration and the Republican congressional leadership are urging Congress to ratify the trade and investment pact the administration recently negotiated with China. The agreement is one of a series China is negotiating with members of the World Trade Organization (WTO) in order to join that body. Approval by Congress would, among other things, grant China Permanent Normal Trade Relations (PNTR) -- thereby surrendering Congress' existing right to an annual review and renewal of the United States' trade relationship with China. In that event, the United States will give up the most important nonmilitary leverage it has in its complex relationship with the authoritarian and unpredictable Chinese regime.

Congress must now judge whether the likely costs are justified by the likely benefits. As always, the burden of proof is on those who propose a change in policy. Supporters of the agreement have claimed that it will bring two types of benefits: economic benefits in the form of expanding jobs and income for Americans, and geopolitical benefits in the form of increased U.S. influence over China's internal development. An analysis of the costs and potential benefits in these areas indicates that the trade pact's supporters have not made their case.