BACKGROUND
CHINA'S MOST FAVOURED NATION STATUS (MFN)
1. MFN enables Chinese imports into the US to benefit from preferential tariffs. President Bush renewed China's MFN for a further year on 2 June 92. The Democrats have introduced a joint resolution seeking revocation of MFN for 1992 and a bill seeking to attach conditionality on MFN status for 1993. Voting on both will take place on 21 July. In previous years the President has had to use
his veto to block such bills, and MFN opponents have failed to muster the two-thirds majority in the Senate necessary to override the veto.
2. Revoking MFN or making its renewal conditional would severely damage HK's economy. Two thirds of China's exports to the US pass through Hong Kong. A revocation of MFN would cause a loss of up to 60,000 Hong Kong jobs, a halving of GDP growth, and a loss of income in Hong Kong of HK$ 12-16bn. Conditional renewal could be as damaging as it would bring uncertainty in the markets and lead to an erosion of confidence in Hong Kong as a major trading and financial centre.
3. On 8 July the Co-operative Resources Centre (CRC) initiated a motion debate in Legco supporting unconditional renewal of MFN and urging HKG to maintain vigorous efforts, and when necessary seek greater support from HMG, in pursuit of this goal. The UDHK (United Democrats) attempted to introduce an amendment to the resolution linking it to an improvement by China on its human rights record. In the event the UDHK amendment motion was defeated, and the original CRC motion carried 40 - 0, with 11 abstentions (by UDHK). In his speech the Secretary for Trade and Industry reiterated HKG's consistent support for unconditional MFN renewal, and emphasised that the official members' vote against the amendment had nothing to do with the human rights situation in China. The HKG position, which we support, is that MFN is a trade matter and should not be linked with other issues. There has not so far been any Congressional reaction to the Legco debate (the Senate is in recess).
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