In May 2000 the United States Congress granted China permanent normal trade relations (PNTR) status. The vote was held due to China's upcoming application to become a member of the World Trade Organization (WTO). The organization consists of nations that agree to abide by certain international trade regulations. These regulations are intended to decrease barriers to trade. They are also meant to increase trade among the member nations. Some of these regulations include low tariffs and a minimum of quotas. They are also intended to make sure that member nations are relatively uniform in their trade practices. Since the United States granted PNTR status to China, it is most certain that China will be allowed entry into the WTO.

CS Question #1: Why is it important for China to be allowed to join the WTO?

Congress's vote to grant China PNTR status was surrounded by controversy and debate. It passed only by a very narrow margin. Many U.S. citizens and lawmakers were concerned that the action would hurt both the people of China and of the United States. The main groups that opposed this act were labor unions, human rights organizations and certain industries. The labor unions feel that China does not provide the rights or pay that Chinese laborers deserve. The human rights groups feel that this U.S. action helps support the human rights violations in China. The Chinese have a totalitarian communist government, which does not allow freedom of expression. In fact, many citizens have become political prisoners for their attempts to speak out against the government. In addition, the government does not address documented unsafe working conditions. Some industries, like the textile industry, had economic reasons for disapproving of China's new status. These industries cannot compete with China from a price perspective. China produces textiles at a much lower cost than U.S. manufacturers. Chinese manufacturers can offer these products in the U.S. market at a much lower price.

CS Question #2: Of the three groups, which do you think has the strongest argument against granting PNTR status to China?

With so many groups against granting PNTR status to China, why did the act pass in Congress? The answer is that some very powerful groups did support granting it. These groups included most large U.S. corporations, agricultural professionals and retailers. Many large corporations, like General Motors, Motorola and Caterpillar, were supportive of the new trade relation status. For them, the Chinese market represents a billion potential new customers. Over the past 50 years, China has lost one fifth of the land available for farming. This loss is due to soil erosion and increased pollution. The Chinese government has not invested much capital in the agricultural sector of the economy. With the barriers to exports largely removed, U.S. farmers and ranchers could sell many of their agricultural products in China. U.S. retailers also supported normalized trade with China. They feel it would provide more access and options to consumers. U.S. financial companies were eager to open the market between the United States and China. Banks and insurance companies envision a huge business for loan officers and insurance underwriters. They will be making loans and creating policies in the mature economy of China.

CS Question #3: What do you think is the main reason that the Chinese market is so important to U.S. businesses?

This issue is like every political or social issue. The benefits and costs of granting permanent normal trade relation (PNTR) status to China are debatable. Economists and politicians can support each position. Only the future will tell if this action will help China progress politically. It might provide a forum for both economic and cultural trade. However, one thing is certain: This action provides a unique opportunity for any business that is ready to take advantage of it.

CS Question #4: Based on the information in this case study do you agree or disagree with the PNTR status awarded to China. Explain your answer.

Further Thought:

1. Why does it benefit the Chinese economy to have permanent normal trade relations with the United States?
2. What negative impacts does China's status have on the United States?
3. Do you think that open international trade will affect Chinese politics or human rights issues? Why?