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CONFIDENTIAL
MOST FAVOURED NATION STATUS (MFN)
Miks oalz
1. MFN enables Chinese imports into the US to benefit from
preferential tariffs (as if China were a member of GATT). MFN has to be confirmed annually. President Bush renewed China's
MFN for a further year on 2 June 1992.
2.
Revoking MFN would severely damage Hong Kong's economy as over 70% of Chinese exports to the US pass through Hong Kong. It would cause a loss of up to 60,000 Hong Kong jobs, halve GDP growth, and result in a loss to Hong Kong of some HK$12-16bn. US interests in Hong Kong, which are extensive,
would be hit. Conditional renewal would also be very
damaging.
3.
He
We do not know the policy Clinton will pursue on MFN. could allow MFN to lapse, renew it unconditionally, or renew it only in respect of certain Chinese goods (eg those produced outside the state sector). One other alternative favoured by some of his advisers is to renew MFN for one year with the condition that it will not be renewed again in 1994 unless China meets certain requirements in respect of human rights.
4. We plan an extensive lobbying campaign of the Clinton team and new Congress to ensure they understand that withdrawal of MFN would damage severely Hong Kong's economy, and that a compromise solution of targetting only Chinese state owned enterprises would not be a satisfactory solution.
most.fav.ADM
CONFIDENTIAL
SLM