Sen. Tom Cotton Announces Bill to Strip China of ‘Most Favored Nation’ Status

Sen. Tom Cotton (R-Ark.) attends a press conference in Washington on July 1, 2020. Tasos Katopodis/Getty Images

Sen. Tom Cotton (R-Ark.) on Monday said he will introduce new legislation this week that would cut China’s special trade privileges by revoking its permanent most favored nation status, formally known as the permanent normal trade relations (PNTR) designation, and instead revert to a prior arrangement where the communist-ruled country’s eligibility is reviewed and, potentially, approved annually.

Cotton said in a post on Twitter that the move would be a step to counter the loss of American manufacturing.

“China should be stripped of its permanent most-favored-nation status,” Cotton wrote in a post on Twitter on Monday. “Joe Biden voted to give the communist country the special trade status 20 years ago, supercharging the loss of American manufacturing jobs. I’m introducing legislation to end it.”

Two decades ago, President Bill Clinton signed into law the U.S.-China Relations Act of 2000, which paved the way to China’s PNTR status, previously known as the most favored nation (MFN) designation. President George W. Bush, on Dec. 27, 2001, signed a proclamation formally making China’s most favored nation status permanent.

“Taking effect January 1, 2002, this is the final step in normalizing U.S.-China trade relations and welcoming China into a global, rules-based trading system,” the White House said in a statement at the time.

In a follow-up post on Tuesday, Cotton suggested that subjecting China’s PNTR status to an annual review would be a way to hold the country to its commitments in the area of trade and human rights.

“Ending China’s permanent most-favored-nation status would put pressure on the Communist Party to uphold their trade obligations and the rights of their own citizens,” Cotton wrote.

Cotton said in an interview on Fox & Friends on Monday that revoking the special status would also give the United States leverage in case of an escalation of tensions.

“Let’s say China shoots missiles at our ships in the Western Pacific or cracks down on Hong Kong. Then we would be able to say each year, we are not going to renew most favored nation status for China,” he said.

The decision to remove the requirement to subject China’s trade status with the United States to an annual review has been criticized on a number of fronts, including that while China benefitted from unfettered access to American consumers, it kept its market selectively closed to foreign competition, forced U.S. companies to enter into joint ventures with Chinese state-controlled enterprises and so gained access to key technologies, and continued its past pattern of suppressing dissent.

“The promised freedom in China didn’t develop,” wrote Epoch Times contributor Ronald J. Rychlak, the Jamie L. Whitten chair in law and government at the University of Mississippi, in an op-ed. “Many Western intellectuals and their Chinese counterparts have noted that China today is less free than it was a decade ago. Free speech, dissent, and religion have all been suppressed by the regime. In fact, the Chinese regime recently launched perhaps its strongest censorship campaign ever, right around the 30th anniversary of the Tiananmen Square massacre,” Rychlak wrote.

Cargo containers are loaded on container ships at a port in Qingdao, a city in eastern China's Shandong Province, on April 8, 2018. AFP via Getty Images

He argued that free trade benefits all sides, but only if all parties play by the rules.

“Actual free trade is best for everyone, but that isn’t how China has operated. While U.S. firms deal with things such as minimum wage, occupational health and safety regulations, and all types of environmental laws, China uses prisoners for labor. In fact, during the past decade, several cases have been brought to light that amount to forced labor in China,” he noted.

Another issue was that the move to normalize trade relations led to over-reliance on supply chains rooted in China.

“Prior to China’s PNTR status, there was always the threat that favorable access to the U.S. market would be revoked. That tended to keep leaders in Beijing concerned about how others perceived the nation’s behavior. It also deterred U.S. firms from becoming overly dependent on Chinese suppliers. Once PNTR was in place, however, the floodgates of investment were opened, and U.S. multinationals developed new China-centric supply chains,” he wrote.

In 2018, the Trump administration launched an effort to re-balance the U.S.-China trade relationship, which led to President Donald Trump imposing around $400 billion in tariffs when negotiations stalled.

Trump has said that China’s unfair trade practices have “ripped off the United States.”

“China’s pattern of misconduct is well known,” Trump said in remarks on May 29. “For decades, they have ripped off the United States like no one has ever done before. Hundreds of billions of dollars a year were lost dealing with China, especially over the years during the prior administration. China raided our factories, offshored our jobs, gutted our industries, stole our intellectual property, and violated their commitments under the World Trade Organization.”

“To make matters worse, they are considered a developing nation getting all sorts of benefits that others, including the United States, are not entitled to,” Trump added, referring to the “developing nation” status China received when it entered the WTO, which gives the world’s second-largest economy special privileges, like longer implementation periods for tariff cuts.

Chinese officials have argued that China’s special WTO rights were legitimately negotiated as part of accession talks.

“Our country is facing various challenges, difficulties and gaps in achieving a balanced and adequate development,” China’s ambassador to the WTO, Zhang Xiangchen, said during an October WTO meeting, according to Bloomberg. “So, we will not make commitments beyond our capabilities, nor will we give up our legitimate and institutional rights as a developing member.”

Trump’s tariffs against China were authorized under Section 301 of the Trade Act of 1974, which lets the president impose tariffs if a foreign country impacts U.S. commerce by using trade practices that are unfair. The Trump administration has justified the tariffs on grounds of China’s forced technology transfer policies and violations of intellectual property rights.