Normal Trade Relations

Normal Trade Relations

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The status of permanent normal trade relations (PNTR) is a legal designation in the United States for free trade with a foreign nation. In the U.S. the name was changed from most favored nation (MFN) to PNTR in 1998.

In international trade
International trade
International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product...

, MFN status (or treatment) is awarded by one nation to another. It means that the receiving nation will be granted all trade advantages — such as low tariffs — that any other nation also receives. In effect, a nation with MFN status will not be discriminated against and will not be treated worse than any other nation with MFN status.

Applicability


Granting of permanent normal trade relations status is automatic, except where specifically denied by law.

The following countries are specifically denied NTR status, as of 2005:
  • Cuba
    Cuba
    The Republic of Cuba is an island nation in the Caribbean. The nation of Cuba consists of the main island of Cuba, the Isla de la Juventud, and several archipelagos. Havana is the largest city in Cuba and the country's capital. Santiago de Cuba is the second largest city...

     (see United States embargo against Cuba
    United States embargo against Cuba
    The United States embargo against Cuba is a commercial, economic, and financial embargo partially imposed on Cuba in October 1960...

    )
  • North Korea
    North Korea
    The Democratic People’s Republic of Korea , , is a country in East Asia, occupying the northern half of the Korean Peninsula. Its capital and largest city is Pyongyang. The Korean Demilitarized Zone serves as the buffer zone between North Korea and South Korea...

     (see North Korea – United States relations)


The following countries are temporarily afforded NTR treatment by presidential waiver in accordance with the Jackson-Vanik amendment
Jackson-Vanik amendment
The Jackson–Vanik amendment is a 1974 provision in United States federal law, intended to affect U.S. trade relations with countries with non-market economies that restrict freedom of emigration and other human rights...

, as of 2005:
  • Belarus
    Belarus
    Belarus , officially the Republic of Belarus, is a landlocked country in Eastern Europe, bordered clockwise by Russia to the northeast, Ukraine to the south, Poland to the west, and Lithuania and Latvia to the northwest. Its capital is Minsk; other major cities include Brest, Grodno , Gomel ,...

  • Turkmenistan
    Turkmenistan
    Turkmenistan , formerly also known as Turkmenia is one of the Turkic states in Central Asia. Until 1991, it was a constituent republic of the Soviet Union, the Turkmen Soviet Socialist Republic . Turkmenistan is one of the six independent Turkic states...

  • Vietnam
    Vietnam
    Vietnam – sometimes spelled Viet Nam , officially the Socialist Republic of Vietnam – is the easternmost country on the Indochina Peninsula in Southeast Asia. It is bordered by China to the north, Laos to the northwest, Cambodia to the southwest, and the South China Sea –...

     (permanent NTR status granted in 2006)


The following countries are temporarily afforded NTR treatment by a presidential compliance determination, in accordance with the Jackson-Vanik amendment
Jackson-Vanik amendment
The Jackson–Vanik amendment is a 1974 provision in United States federal law, intended to affect U.S. trade relations with countries with non-market economies that restrict freedom of emigration and other human rights...

, as of 2005::
  • Azerbaijan
    Azerbaijan
    Azerbaijan , officially the Republic of Azerbaijan is the largest country in the Caucasus region of Eurasia. Located at the crossroads of Western Asia and Eastern Europe, it is bounded by the Caspian Sea to the east, Russia to the north, Georgia to the northwest, Armenia to the west, and Iran to...

  • Kazakhstan
    Kazakhstan
    Kazakhstan , officially the Republic of Kazakhstan, is a transcontinental country in Central Asia and Eastern Europe. Ranked as the ninth largest country in the world, it is also the world's largest landlocked country; its territory of is greater than Western Europe...

  • Moldova
    Moldova
    Moldova , officially the Republic of Moldova is a landlocked state in Eastern Europe, located between Romania to the West and Ukraine to the North, East and South. It declared itself an independent state with the same boundaries as the preceding Moldavian Soviet Socialist Republic in 1991, as part...

  • Russia
    Russia
    Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...

  • Tajikistan
    Tajikistan
    Tajikistan , officially the Republic of Tajikistan , is a mountainous landlocked country in Central Asia. Afghanistan borders it to the south, Uzbekistan to the west, Kyrgyzstan to the north, and China to the east....

  • Ukraine
    Ukraine
    Ukraine is a country in Eastern Europe. It has an area of 603,628 km², making it the second largest contiguous country on the European continent, after Russia...

  • Uzbekistan
    Uzbekistan
    Uzbekistan , officially the Republic of Uzbekistan is a doubly landlocked country in Central Asia and one of the six independent Turkic states. It shares borders with Kazakhstan to the west and to the north, Kyrgyzstan and Tajikistan to the east, and Afghanistan and Turkmenistan to the south....



Embargoes also apply to additional parties; see United States embargoes.

History


In 1948 the United States joined the General Agreement on Tariffs and Trade
General Agreement on Tariffs and Trade
The General Agreement on Tariffs and Trade was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization . GATT was signed in 1947 and lasted until 1993, when it was replaced by the World...

 (GATT), the predecessor organization of the World Trade Organization.

At the same time the United States agreed to extend what was then called Most Favored-Nation status (MFN) to all other countries. The status was also extended to some countries that did not join GATT. In 1951, the U.S. Congress directed President Harry Truman to revoke MFN status to the Soviet Union
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....

 and other Communist countries. Yugoslavia
Socialist Federal Republic of Yugoslavia
The Socialist Federal Republic of Yugoslavia was the Yugoslav state that existed from the abolition of the Yugoslav monarchy until it was dissolved in 1992 amid the Yugoslav Wars. It was a socialist state and a federation made up of six socialist republics: Bosnia and Herzegovina, Croatia,...

 was not part of this exclusion. During the Cold War, most Communist countries were either denied MFN or had to meet certain conditions to be granted the status. Poland was granted MFN in December 1960 by President Eisenhower
Dwight D. Eisenhower
Dwight David "Ike" Eisenhower was the 34th President of the United States, from 1953 until 1961. He was a five-star general in the United States Army...

. Both Poland and Yugoslavia were still on the list of "communist countries", also known as Section 5. In 1962, Congress enacted a directive that jeopardized the status of Poland and Yugoslavia MFN tariff; however, the directive was delayed until a new one was passed that allowed any countries with MFN to keep the status if the President determines it to be in the national interest

In addition some non-Communist countries such as Afghanistan
Afghanistan
Afghanistan , officially the Islamic Republic of Afghanistan, is a landlocked country located in the centre of Asia, forming South Asia, Central Asia and the Middle East. With a population of about 29 million, it has an area of , making it the 42nd most populous and 41st largest nation in the world...

 and Serbia and Montenegro
Serbia and Montenegro
Serbia and Montenegro was a country in southeastern Europe, formed from two former republics of the Socialist Federal Republic of Yugoslavia : Serbia and Montenegro. Following the breakup of Yugoslavia, it was established in 1992 as a federation called the Federal Republic of Yugoslavia...

 were excluded from PNTR/MFN for various reasons. Congressional action denied PNTR status to the reconstituted Federal Republic of Yugoslavia (Serbia and Montenegro) in reaction to the armed conflict in the region and human rights abuses committed after the breakup of the old Yugoslavia.

Countries that wish to have PNTR must fulfill two basic requirements: (1) comply with the Jackson-Vanik
Jackson-Vanik amendment
The Jackson–Vanik amendment is a 1974 provision in United States federal law, intended to affect U.S. trade relations with countries with non-market economies that restrict freedom of emigration and other human rights...

 provisions of the Trade Act of 1974 that states that the President of the United States determines that a country neither denies or impedes the right or opportunity of its citizens to emigrate; and (2) reach a bilateral commercial agreement with the United States. Jackson-Vanik allows for the President to issue a yearly waiver to allow the granting of PNTR.

For many years, People's Republic of China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...

 was the most important country in this group which required an annual waiver to maintain free trade status. The waiver for the PRC had been in effect since 1980. Every year between 1989 and 1999, legislation was introduced in Congress to disapprove the President's waiver. The legislation had sought to tie free trade with China to meeting certain human rights conditions that go beyond freedom of emigration. All such attempted legislation failed to pass. The requirement of an annual waiver was inconsistent with the rules of the World Trade Organization
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...

, and for the PRC to join the WTO, Congressional action was needed to grant PNTR to the PRC. This was accomplished in late-1999, allowing the PRC to join WTO in the following year.

Vietnam
Vietnam
Vietnam – sometimes spelled Viet Nam , officially the Socialist Republic of Vietnam – is the easternmost country on the Indochina Peninsula in Southeast Asia. It is bordered by China to the north, Laos to the northwest, Cambodia to the southwest, and the South China Sea –...

was given temporary free trade status in 2001 on a year-to-year waiver basis. As a prerequisite for that country's accession to the WTO. Vietnam has had PNTR status since December 2006.

U.S. and China


In the last year of his presidency Bill Clinton called on Congress to help him change China’s normal trade relations status with the U.S. to permanent. This would amend the Trade Act of 1974 which had the trade status of China on an annually review to determine the best course of action. The piece of legislation was introduced to the house as H.R. number 4444 on May 15, 2000 by Bill Archer a republican Representative from Texas (he had three cosponsors). Introduce to the house the legislation referred to the Ways and Means committee in the House of Representatives to be amended and written up. The legislation was introduced by saying that the bill was a top priority for the rest of the year and it was vital to the U.S. agriculture market to have access to a market that accounts for one-fifth of the world’s population.

The other crucial point made was the involvement the U.S. needed to help the workers of the People’s Republic of China to lead better lives. Congress added some important points into the legislation to make sure that when China entered the World Trade Organization it could be reprimanded for crimes against the workers of the country, and certain markets would be mutually exclusive between the two countries. The People’s Republic of China’s businesses had to abide by human rights for their workers as stated in the internationally recognized worker rights. To monitor the workers’ rights Congress established that Congressional-Executive Commission on the People’s Republic of China. The commission was to monitor acts of China which reflect compliance or violation, compile lists of persons believed to be imprisoned, detained, or tortured due to pursuit of their human rights, monitor the development of the rule of law in China, and encourage the development of programs and activities of the U.S. government and private organizations with a goal of increasing the interchange of people and ideas. The committee formed, along with the United States Trade Representatives (USTR), and the International Trade Commission (ITC) was to give an annual report to the President.

Congress believed that they needed to pass a bill that would help the economy stay stimulated if not have a higher growth than at the time. The most productive and trouble-free way to keep the economy growing strong was to outsource and trade more with China. China was to help provide America with superior markets in industry, agriculture, and technology. Congress as whole thought that without these things America would fall behind economically and technologically to some enemies of America. If China did not get support from America they could go to another country that would not be so strict on their treatment of people, and they could use that country to gain access to the WTO. The down side to this was that no markets could provide and receive China’s goods like the United States markets could.

The International Trade Commission’s report was the determination of China’s impacts on United States market, and how those certain disruptions can be remedied or expanded. The ITC was to find what domestic industries were being hurt by the trade and to present how the repair could be made. This was the most important part of the bill for most of the country. The bill breaks down to depending on how the different markets in the U.S. economy are doing it can use China’s markets as a catalyst to help stabilize when need be.
The bill created a stir among Congress and the American people when presented because people did not believe that America could actually do anything to help regulate China’s treatment of workers. Aside from people’s rights activists many business men believed in the bill to help flourish the different areas of industry. The legislation was passed by the House of Representatives on May 24, 2000 and by the Senate on September 19, 2000. Members of the senate wanted to add in amendments on treating their workers even better than stated in previous legislation, and to make the punishment for breaking the rules greater. Unfortunately Congress was up for re-election that year so due to time constraints all twenty four amendments were rejected. The President signed on Oct 10, 2000 and that day it became Public Law No: 106-286.
After being passed everything seemed to be going well for what Congress had decided on the piece of legislation. However, even when the legislation was passed economists warned that there could be serious repercussions if we granted China trade without putting more restrictions and repercussions if China contravened. The Department of Commerce did not believe that this was as important as the immediate future, and neither did Congress.
Since the passing of the bill there have been three attempts to repeal the PNTR with China. The best attempt was in 2005 when Representative Sanders and sixty one cosponsors introduced a legislation that would repeal the Permanent Normal Trade Relations with China. Rep. Sanders said to the house, “anyone who takes an objective look at our trade policy with China must conclude that is an absolute failure and needs to be fundamentally overhauled.” The Representative goes into numbers of the trade deficit increased and the number of American jobs being lost to our overseas competitors. One point that Sanders did not make was the because of Congress’s time constraints, and the legislation being passed so quickly nothing in the way China treats its workers changed. The bill actually hurt Chinese workers’ rights in the end.