TNAG-2469-FCO40-3593-Most-favoured-nation-status-for-China-Hong-Kong-interests-1992 — Page 210

21 October 1992

A Murray

Murray

OT2

DTI

:) Miss Gray 2) Mr Bailey

AAAA

3/4

3). PA DC 285

British Embassy

Washington

CC DC 31

Trade Policy Department

3100 Massachusetts Ave N.W.

Washington D.C. 20008-3600

Telephone: (202) 898-

Telex: RCA 211427 or 216760-WUI 64224 Facsimile: (202) 898-4224

IATION

US/CHINA TRADE NEGOTIATIONS

(75

1. Our telno 2254 records the terms of the agreement between the US and China in the Section 301 case against China's import barriers. On 16 October I attended a discussion of the agreement at the National Association of Manufacturers with Ira Wolf, USTR, and Don Anderson of the US/China Business Council.

2.

Having outlined the agreement, Wolf's message to the business community was that economic change in China was now inevitable: it was time to devote corporate resources to the market. Don Anderson confirmed this assessment. Deng Xiaoping had firm support for his economic policies, including from the military. The economy was booming with 12% growth. There was some concern about over-heating, but others argued that the economy was merely realising its potential. Foreign trade would continue to expand, particularly as Taiwan and Hong Kong moved manufacturing to the mainland. The State sector continued to act as a drag on overall growth, but reform was beginning. There was considerable growth potential in both the consumer economy and the service sector.

3. In discussion, there was lengthy debate about the likely approach of a Clinton Administration and its implications for the agreement, given his criticism of President Bush's policy on human rights and support for conditional Mfn. Wolf's view was that were there to be outright withdrawal of MFN, the agreement would fall. But if the legislation were passed which required a report from the President on progress on human rights there would be scope for China to take a pragmatic approach. than reneging on the trade agreement, the Chinese would cooperate with the US side in presenting the progress that was already happening. Anderson agreed: China's pragmatism was demonstrated by the fact that the trade agreement had gone ahead despite the sale of F16's in Taiwan.

Rather

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