TNAG-2243-FCO40-3224-Most-favoured-nation-status-for-China-impact-on-Hong-Kong-1991 — Page 26

CONFIDENTIAL

142

154616

MDHIAN 1346

CONFIDENTIAL

FM WASHINGTON

TO IMMEDIATE FCO

TELNO

1630

OF 142329Z JUNE 91

91TOP COPY

ODIST?

INFO PRIORITY HONG KONG, PEKING, UKREP JLG HONG KONG

Izg

OUR TELNO 1495: CHINA/US RELATIONS: MFN

SUMMARY

4716

;) CC FF file 11) Top (opy 4th Stare,

Азан!

MICD.

1. IN THE FIRST CONGRESSIONAL HEARING ON MFN THE ADMINISTRATION ASS

ARGUE FIRMLY AGAINST CONDITIONALITY. POSSIBLE COMPROMISES INVOLVING CONCESSIONS NOT DIRECTLY RELATED TO MFN FLOATED ON THE HILL. SUNUNU CONSIDERS DEBATE GOING SLIGHTLY BETTER THAN EXPECTED, BUT ADMINISTRATION DO NOT YET HAVE NECESSARY SUPPORT.

DETAIL

2.

DEPUTY SECRETARY OF STATE EAGLEBURGER GAVE EVIDENCE ON MFN

STATUS FOR CHINA ON 12 JUNE BEFORE THE TRADE SUB COMMITTEE OF THE

HOUSE WAYS AND MEANS COMMITTEE. HE ARGUED STRONGLY IN FAVOUR OF UNCONDITIONAL RENEWAL. HE SAID THAT THE US OBJECTIVE WAS TO ENCOURAGE REFORM IN CHINA. THE ORIGINAL EXTENSION OF MFN STATUS TO CHINA IN 1980 HAD PLAYED A VITAL ROLE IN BUILDING MOMENTUM FOR CHANGE THROUGH INCREASED TRADE AND CONTACT WITH THE US. TERMINATION OF MFN STATUS WOULD INFLICT HARM ON THOSE MARKET-ORIENTED SECTORS OF THE CHINESE ECONOMY WHICH THE US WAS SEEKING TO ENCOURAGE, AND WOULD NOT PERSUADE THE CHINESE TO CHANGE THEIR BEHAVIOUR. TERMINATION WOULD ALSO HIT AMERICAN INDUSTRY (100,000 JOBS DEPENDENT ON EXPORTS TO CHINA) AND SUBSEQUENT REBUILDING OF BUSINESS LINKS WOULD BE A LONG AND DIFFICULT PROCESS.

3.

EAGLEBURGER SAID THAT THE ADMINISTRATION STRONGLY DISAGREED WITH RENEWAL OF MFN STATUS ON A CONDITIONAL BASIS. PROGRESS ON HUMAN RIGHTS COULD NOT BE GUARANTEED IN A PARTICULAR TIMEFRAME. THE OBJECTIVE WAS TO WORK FOR LONG TERM CHANGE IN CHINA. CONDITIONAL RENEWAL WOULD HANDICAP US BUSINESS IN CHINA BY REMOVING THE ELEMENT OF PREDICTABILITY NECESSARY FOR PLANNING. CONSERVATIVE CHINESE LEADERS WOULD BAULK AT MAKING CONCESSIONS IN THE FACE OF A US ULTIMATUM.

4.

THE VIEWS OF SUB COMMITTEE MEMBERS RANGED FROM SUPPORT FOR RENEWAL WITHOUT CONDITIONS THROUGH TO IMMEDIATE TERMINATION.

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