A Bone-Headed Move: The unfortunate case of permanent most-favored nation status for China.

Author:Mastel, Greg
 
FREE EXCERPT

So if you believe in a future of openness and freedom in China, you ought to be for this [China WTO accession] agreement. If you believe in a future of greater prosperity for the American people, you certainly should be for this agreement. If you believe in a future of peace and prosperity for Asia and the world, you should be for this agreement. This is the right thing to do. It's an historic opportunity and a profound American responsibility.

--President Bill Clinton, May 2000, speaking on extending permanent MFN status to China and China's membership in the WTO

As President Clinton's remarks demonstrate, in 2000 U.S. policymakers thought that they had "solved" China. In a single stroke, granting China permanent most-favored nation trade status (a promise of low tariffs and good trade treatment) and ushering Beijing into the rules set by the World Trade Organization would force China to open its markets, live by international trade rules, and set in motion an inevitable process of reform in China.

Nearly two decades on, it appears that every part of that positive vision was dead wrong. As demonstrated with the current disputes over China's technological blackmail and its destruction of the global steel market, trade problems with China have grown far worse since 2000. Membership in the WTO, which permanent MFN made possible for China, has proven unable to discipline China's many trade sins. It has, in fact, allowed China to attack critical trade policies of Washington and Brussels, like the use of anti-dumping laws to blunt the Chinese mercantilism. Political oppression in China has by many measures grown worse and certainly has not disappeared. From a security perspective, China's aggressive actions with regard to Taiwan and in the South China Sea suggest that the trillions of dollars worth of trade and investment made possible by MFN has, in part, funded Beijing's military ambitions.

Even the most cursory examination of the record suggests that granting MFN to China is a tragically failed policy. Unfortunately, identifying a policy failure does not always immediately suggest a solution. It is difficult to "unscramble an egg," particularly eighteen years after breaking the shell. But as some of the Trump Administration's moves toward China have suggested, it is possible to begin reversing the permanent MFN decision.

THE BIRTH AND NURTURING OF A BAD IDEA

When described in stark terms like those used above, it is difficult to fathom what policymakers were thinking on China in 2000. Ft is first important to recognize that the turn of the century was a unique time for American foreign policy. The Soviet Union--the global adversary of the United States for nearly half a century--had suddenly imploded a decade earlier. This led to a crumbling of the Soviet bloc and a seemingly instant near-global recognition that free markets had beaten communism. A few countries, such as China and Cuba, held on to some version of Karl Marx's vision, but there seemed almost an inevitability that they would soon fall into line.

Against this background, Beijing's Politburo appeared just an anachronism desperately willing to oppress its people to hold off the inevitable for a few years. At times, China seemed more a country worthy of sympathy than a global rival. This led U.S. policymakers in both political parties and in both the executive and legislative branches to think in terms of easing China's transition rather than confronting China on key issues. After all, the hardliners in Beijing were sure to be swept away by reformers in a few years just as their counterparts in Moscow had been.

In signing into law the legislation to grant China MFN, President Clinton repeated many of the now discredited notions that formed the foundation of the widely held view of China at the time. In fairness to President Clinton, it is important to acknowledge that he did not conceive the policy. In fact, he entered the White House critical of it. But he became a supporter as the new "Washington consensus" was established. There were certainly a few critics of the pro-China viewpoint, but there was also a seemingly endless list of Chinese apologists across...

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