China Trade:

WTO Membership and Most-Favored-Nation Status

T-NSIAD-98-209: Published: Jun 17, 1998. Publicly Released: Jun 17, 1998.

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Benjamin F. Nelson
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Pursuant to a congressional request, GAO discussed the relationship between China's most-favored nation (MFN) status and World Trade Organization (WTO) membership, focusing on the: (1) WTO accession process; and (2) legal framework affecting China's MFN status, its implications for WTO membership, and the role Congress plays in the process.

GAO noted that: (1) China has the largest economy worldwide that is not covered by the WTO; (2) the WTO seeks to promote open and fair international trade through increased transparency, rules, and commitments to reduce barriers on foreign goods and services, and provide a binding system for resolving disputes; (3) China would like to join the WTO and is currently in the negotiation phase, which is the second of the four-stage process for becoming a member; (4) joining the WTO will require China to make substantial changes to its economy; (5) although Congress does not vote on China's WTO membership, the United States Trade Representative is required to consult with Congress before a WTO vote is taken; (6) the Administration plans to ask Congress to enact legislation to resolve a potential conflict between the conditional MFN afforded China under U.S. legislation and the unconditional MFN provided by the WTO agreements; (7) if China becomes a member and Congress has not enacted this legislation, the Administration intends to invoke a WTO provision that would permit the United States not to apply the WTO Agreements to China; (8) an important consequence of taking this exception is that China and the United States would not be obligated to provide each other all the WTO trade commitments that they would give to other WTO member states; and (9) in such a situation, U.S. business may not be able to benefit fully from the commitments China will make to open its markets to other WTO members.

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