TNAG-2469-FCO40-3593-Most-favoured-nation-status-for-China-Hong-Kong-interests-1992 — Page 171

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1.

The US's foreign trade policy towards China under

Most Favoured Nation (MFN) enables the latter's imports

into the US, to benefit from preferential tariffs (as if

China were a member of GATT). MFN has to be

confirmed annually, and President Bush renewed China's MFN

for a further year on 2 Jun 92. The President's renewal

can be vetoed in either house in Congress by a two thirds

majority, and this year the Congressional democrats introduced

two bills, one seeking total revocation of MFN for 1992, and

the other seeking to attach conditions to renewal for 1993.

Neither bill received sufficient votes to challenge the

President's decision.

2.

The passage of either of the bills would have caused

severe damage to Hong Kong'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$ 12-16

bn. US interests in Hong Kong, which are extensive, would

also be hit. 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.

Although in theory Congress can seek to revoke or have conditions attached to China's MFN at any time, it is likely that most Congressional activity will take

place in the run up to the President's decision on renewal which will take place in early June 1993 and thereafter. From campaign statements made by President (elect) Clinton and his position on human rights, it is evident that unconditional renewal of China's MFN next year could be in

doubt.

us.inftalks

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