China PNTR and NAFTA: A Comparison
Why PNTR and China's WTO Accession is not the same as NAFTA

How does China's World Trade Organization (WTO) accession, and the permanent Normal Trading Relations (PNTR) legislation that the United States needs to benefit from it, differ from the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT) Uruguay Round?

• To join the WTO, China must unilaterally open its markets and agree to play by the same rules as other WTO Members. In NAFTA (as in the Uruguay Round), the United States had to make significant trade-offs with its negotiating partners in order to win key concessions from them. US concessions in NAFTA involved greater US market access terms, and required substantial changes in our trade laws.
• Unlike the NAFTA and Uruguay Round negotiations, negotiating new WTO memberships (like China's today), is a bargain over one-way concessions. The party seeking admission (China in this case) must meet the requirements its negotiating partners (especially the United States, which is the toughest of the world's bargainers because our interests are the most comprehensive) place upon it: e.g., greater market access, transparency of decision making, equal treatment for domestic and foreign businesses, market-based trade and investment behavior, impartial execution of laws, and elimination of all kinds of discriminatory "non-tariff barriers" like bureaucratic red tape and exclusion of foreign firms from key markets.
• In November, 1999, after thirteen years of strenuous negotiations, the US finally concluded an extensive WTO accession agreement with China. Unlike the NAFTA pact, the US-China agreement lays out only the other country's commitments to change its ways and open the door to US goods and services. The United States was required to make no changes in its trade system, which is already among the most open in the world.

Won't US companies move lots of US jobs to China if we give China PNTR tariff status?

• Firms in some sectors may eventually decide to manufacture in China, to be closer to their customers. But indications are that exports of US manufactured products, particularly in sectors in which the United States leads in technology, features, price, and after-sale services, would get a significant boost from lower Chinese import barriers.
• China's WTO accession does not spell automatic loss of US jobs, as PNTR's opponents say it does. Nor does it spell a gigantic expansion of US employment. As Minnesota Governor Jesse Ventura recently pointed out, evocations of the "Great Sucking Sound" debate over NAFTA a few years ago will not wash. Leave aside the fact that China's WTO accession involves no US economic concessions at all, and leave aside the fact that NAFTA has bolstered employment in some US sectors. Consider:
  • Massive lowering of Chinese tariffs is likely to diminish the pressure to invest in-country that some foreign companies now face, simply to get their products into the Chinese market. If your product is no longer hit with tariffs that price you out of China's market, you may decide to ship into China from the United States, or from another production facility already operating somewhere else.
  • The percentage of total production costs accounted for by labor varies from product to product. Most US investment abroad is rooted in calculations other than labor cost. If companies really consider low labor costs to be the sole factor in their decisions, they will move jobs to many countries before China. In fact, for the most part, US exports to the world do not consist of labor-intensive manufactured products, but rather of products of US technological strength, design and marketing skill, and production efficiency.
  • Many of the concessions that China has now made were until recently the cherished aims of the same US political forces that now insist on denying them to our own people. Would they rather, as will be the case if PNTR is not approved, that US firms continue to be forced to transfer technology to China and export their products from China? What does that do for US employment?

What does the United States give up if China gets into the WTO?

• Effectively nothing. The US market is already open. However, Congress must extend PNTR to secure the full benefits of China's WTO commitments.
• The United States has given China MFN/NTR on an annual basis since 1980. As a result, US duties on Chinese products would remain exactly the same.

What does the United States give up if China enters the WTO without PNTR from the United States?

• The future. Without PNTR, the United States will watch as 133 other WTO nations step forward to benefit from the Chinese WTO commitments that the United States secured at the negotiating table. But the United States will be unable to bring those benefits home to its own citizens, and Congressional rejection of PNTR will be the reason: without PNTR, US treatment of China in the WTO will be discriminatory, since we grant PNTR to virtually all other WTO members, and most certainly extend PNTR to all significant US trade partners. If we discriminate, China will discriminate in return against American products, services, farmers and workers.
• The Untied States would also lose access to the WTO's multilateral dispute resolution and enforcement mechanism when the United States has legitimate trade grievances against China. The power of WTO pressure will not be ours to use against China if we do not have full WTO-member relations with China.
• Hopes for progress on non-trade issues with China are also likely to be affected. The United States will be far less able to make progress with China on issues such as human rights, weapons proliferation, Taiwan, and others if it turns its back on thirteen years of negotiations with China over WTO accession terms. The assertion that walking away from our WTO agreement with the PRC will bring improvements in China's non-trade behavior is a hoax; why would China seek to meet US needs on other issues when, after meeting US demands on trade, the United States decided it didn't want to accept the terms it had itself demanded?