Mr Broadbent
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704
MFN RENEWAL FOR CHINA
1.
Mr Cooper's minute of 28 October to Mr Hum refers to a possible selective application of US MFN status for China exempting trade routed via Hong Kong. On first sight this appears an attractive option, but I do not believe it
would be viable.
2. From the available data it appears that just over 70 per cent of Chinese exports to the US are already routed through Hong Kong (In 1991, US fob imports from China $18.2bn, Hong Kong fob re-exports to the US of China origin $13.3bn). Thus this selective application of MFN would not pose a great threat to China nor would it be attractive to the US Congress. In fact most, if not all, of the options which attempt to target certain types of Chinese exports to the US seem unworkable.
3.
The most likely outcome still seems to be full renewal with some conditions, probably on human rights (Washington telno 2497 attached). Whilst I would hesitate to suggest a strategy it would seem appropriate to explore types of political conditions which China would, at the deadline, acquiesce to. Recent Sino-US Section 301 trade talks have shown that China is prepared to move substantially on economic issues to maintain US market
the question now must be whether this also applies to more sensitive policy areas.
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Chris Lane
17 November 1992
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