TNAG-2914-FCO40-4189-International-support-from-the-USA-regarding-the-future-of-H-1993 — Page 66

RESTRICTED

PUS' VISIT TO WASHINGTON SUNDAY 20 JUNE

BACKGROUND

MFN

To

TUESDAY 22JUNE

1. Most Favoured Nation status (MFN) enables Chinese imports into the US to benefit from preferential tariffs. China's MFN status has to be renewed by the President on an annual basis. Since Tiananmen Square in 1989, there has been pressure in Congress to use MFN as a lever on China to improve its human rights record by placing conditions on its renewal. The Clinton administration has also been under pressure to use MFN to address concerns about China's arms proliferation activities and trade surplus. However, revoking MFN would severely damage Hong Kong's economy as over 70% of Chinese exports to the US pass through Hong Kong. It could cause the loss of up to 70,000 Hong Kong jobs and halve GDP growth.

2.

On 28 May President Clinton renewed MFN by Executive Order, but for the first time attached conditions for renewal thereafter. The conditions for renewal in 1994 are limited to requiring China to make significant progress over human rights. The Order instructs the Secretary of State to make a recommendation on extension in 1994 taking into account whether:

renewal would promote freedom of emigration;

China is complying with the prison labour agreement;

China is beginning to adhere to the universal

declaration of human rights;

China is releasing political prisoners;

China is protecting Tibet's religion and culture;

China is permitting international radio and television broadcasts into its territory.

3. In separate statements both the President and Winston Lord made it clear that the Administration had sought to strike a balance between credible and achievable conditions. Both stressed the importance which the Administration attached to the the future of China and Hong Kong and expressed their support for the Governor's efforts to broaden democracy. The President made it clear that the core of US policy would be insistence on significant progress over human rights and whether MFN was extended in 1994 would depend on China's record in this area. On Trade and proliferation concerns Lord said the US would use the other instruments at its disposal eg legislation on missile sanctions, COCOM, 301 negotiations on trade or Gatt excision.

pus.wash.Adm

SLM

RESTRICTED