China as Most Favored Nation

Essay by bwongmanUniversity, Bachelor'sA-, March 2002

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The most-favored-nation status, given by the United States, is very important in China's run to become the world's strongest nation. China is a sleeping giant that just needs the opportunity to wake up, and China believes that the United States granting them the most-favored-nation status is this opportunity. China has the world's largest population with lots of untapped potential. Opening this enormous market to the United States is very advantageous to both countries if they can cooperate, but it is not easy for two competing world powers with different cultures to work together in harmony.

The United States started the most-favored-nation trade status as a version of the European preferential trade system. The United States first granted most-favored-nation trading status to China in 1979 , following the historic efforts of President Nixon during the 1970's to restore diplomatic ties. Historically, there was a big difference that existed between the unconditional most-favored-nation clause in European trade law and the American version of conditional most-favored-nation.

Under unconditional most-favored-nation status, one country's extension of tariff concessions guarantees the same concessions to all nations associated with it through commercial treaties. American conditional most-favored-nation status provided treaty signatories only the opportunity to negotiate most-favored-nation status when most-favored-nation status was extended to another trading partner. Thus meaning that the United States gives significant economic advantages to one nation in the form of most-favored-nation trading status.

China was granted most-favored-nation status in 1979 after lots of debate from the American congress. Some of the Americans did not want China to be granted most-favored-nation status because China was a communist country. The United States also wanted China to improve their current policies. After five years of decision-making, the Americans approved, and most-favored-nation status was given to China.

The renewal of China's most-favored-nation trade status has been supported by...