The United States and China are in a new Cold War. Given that reality, our leaders must take stock of our economic arsenal. It’s time for Congress to review China’s permanent normal trade relations, or PNTR, status.
Countries granted PNTR status, once called “most favored nation” status, receive preferential trade treatment such as lower tariffs and fewer barriers such as import quotas. Washington granted China PNTR status in the U.S.-China Relations Act of 2000.
That designation fundamentally altered China-U.S. trade relations. American consumers gained access to lower-priced Chinese exports, and U.S. companies enjoyed improved profit margins. From 2001 to 2021, the value of goods imported from China quadrupled, to $500 billion. U.S. exports to China also reached a record high in 2021, but so did our trade deficit with China.
But in the more than two decades since receiving PNTR status and its subsequent ascension to the World Trade Organization, China has routinely violated its trade commitments and international trade law.
In 2018, a U.S. government investigation found that China has been transferring technology illegally and stealing U.S. intellectual property at a wholesale level. The Office of the U.S. Trade Representative, tasked with monitoring China‘s compliance with WTO commitments, found China to have a “poor” compliance record and is “violating, disregarding and evading WTO rules.”
Last year, the U.S.-China Economic and Security Review Commission and the Congressional-Executive Commission on China reported over 100 examples of disturbing Chinese economic and human rights practices.
Good-faith efforts to alter Beijing’s unlawful practices, through diplomacy and arbitration, have too often proved ineffective. And even when China abides by WTO rulings against it, it amends its violating policies quite narrowly, without addressing the underlying economic practices.
Bilateral negotiations have produced equally frustrating results. For example, the 2020 Phase One Agreement with Beijing ostensibly secured some commitments from China to resolve trade disputes. Yet the U.S. trade representative has assessed that China has not fully upheld or implemented several of those commitments.
All this has cost Americans dearly. According to one industry analysis, the United States has lost 3.7 million jobs to China since granting Beijing PNTR status.
The U.S.-China Economic and Security Review Commission recommended that lawmakers review China’s compliance with its trade commitments and—if they find China noncompliant—consider legislation that would suspend or revoke its PNTR status.
The ball is already rolling.
Sen. Josh Hawley, Missouri Republican, introduced a bill last month to withdraw normal trade relations treatment for products exported from China. A bipartisan bill calling for the revocation of China‘s PNTR status has been introduced in the House.
Clearly, interest in reviewing—and, for some, revoking—PNTR status is gaining momentum.
But stripping China of its PNTR status could substantially raise the cost of imported goods. Thus, it’s essential that, as lawmakers assess Chinese compliance, they also assess the potential economic impact revoking PNTR.
Before voting on such an action, Congress must be aware of—and prepared to mitigate—any detrimental impact for U.S. businesses and consumers.
Although the U.S. can unilaterally revoke PNTR, it is advisable to consult our allies and partners first. With strong U.S. leadership, other countries may reconsider their own policies granting China PNTR status, magnifying the effectiveness of Washington’s action.
China has been given ample opportunity to uphold its commitments to the WTO and the U.S., yet for over 20 years, it has consistently failed to do so. Until now, it has had little incentive to change course.
Reviewing PNTR status will put Beijing on notice: the U.S. will no longer give China a free pass to flout the rules at the expense of the American people and their economic well-being. It’s time to fire back in this new Cold War.
This piece originally appeared in The Washington Times