House Members Plan Legislation to Delist China as MFN

Some leaders on the House Foreign Affairs Committee intend to file legislation to remove China's Most Favored Nation status, according to Rep. Ted Poe, R-Texas, chairman of the Subcommittee on Terrorism, Nonproliferation, and Trade. Poe said in a July 11 interview that Asia Subcommittee Chairman Ted Yoho and the ranking member on both subcommittees are all in agreement on the legislation. China has had MFN status with the U.S. since 1980, but that was made permanent only in 2001. In 1990, in the wake of the Tiananmen Square massacre, Congress included non-binding language suggesting the president rethink MFN for China.

Members of Congress and experts testifying in front of the joint subcommittee hearing on China's predatory trade practices on July 11 agreed that the tariffs President Donald Trump has implemented and threatened against China are unlikely to make China curtail its "Made in China 2025" initiative. William Reinsch, an international business expert at the Center for Strategic and International Studies, said that while China might really do something about intellectual property theft -- also a problem for Chinese firms -- Made in China 2025 is a horse of another color. "For China these are not trade issues, they are national security and public control issues, and they are not susceptible to resolution in a trade negotiation." Yoho, R-Fla., said Trump has diagnosed the problem accurately, and said there have been decades of failed attempts at engagement with China. But, he said, "Tariffs alone won't address Chinese industrial policies."

Several Republicans said they're hearing from farmers in their districts whose exports have been hit with retaliatory tariffs. "Of course the Chinese are going to go where we are vulnerable," replied Derek Scissors, an American Enterprise Institute expert on China. "I'm in favor of confronting the Chinese. Easy for me to say, because I'm not a soybean farmer." He said that when he was talking with the administration as they launched the Section 301 investigation that led to this trade war, he warned them: "If you're not willing to stick with this for three years, and take some pain, don't bother." Reinsch said the current situation reminds him of "two 8-year-olds having a staring contest, and seeing who blinks first."

When Scissors spoke at another trade event on China three weeks ago (see 1806210042), he predicted the tariffs would not go past the ones already imposed. The Office of the U.S. Trade Representative released a list of more than 6,000 products that might face 10 percent tariffs on July 10 (see 1807100070). "Now, if you announce them, that's a step towards doing them, the clock has started, so I guess the odds have gone up," Scissors said. But he said that as long as China has learned its lesson, and does not announce more tariffs on U.S. goods, negotiations can begin on increased Chinese purchases of American exports. "I still think we will avoid those tariffs, but the key event is what does the Chinese retaliation look like?"