Today in 2001: President Bush grants permanent normal trading relations status to China

December 27, 2013

Today in Legal HistoryOn December 27, 2001, President George W. Bush signed a proclamation granting permanent normal trading relations (PNTR) status to the People’s Republic of China (PRC).

At the same time, Bush also ended the application to China of the Jackson-Vanik provisions, which require “non-market economies” (i.e. communist nations) to show they do not restrict emigration before they can have normal trading relations with the United States.

In plain English, this event meant the normalization of relations between the U.S. and China.  There are significant political, legal, and economic implications to this status change.

Politically, the proclamation marked the culmination of years of efforts to bring the relationship of the two nations into a state of friendship and normalcy.

Throughout the Cold War, the U.S. and China’s relationship had been one of alternating contention and reconciliation.

The U.S. did not formally recognize the PRC for 30 years after its founding in 1949, instead recognizing the Republic of China government on Taiwan as the legitimate government of China. 

Although the U.S. and China began working toward diplomatic ties in the early 1950s, the PRC’s entry into the Korean War on the side of the North Koreans destroyed any hope of normalizing relations between China and the U.S.  Furthermore, China’s entry into the Korean War caused U.S. policy to swing from minimal support for Taiwan to complete defense of Taiwan from the PRC.

Tensions continued throughout the Vietnam War, which again found the U.S. and China on opposing sides.  However, circumstances at the end of the war, along with rising tensions between China and the Soviet Union, opened the door for renewed improvement of relations between the U.S. and China – with diplomatic ties between the two reaching new heights in the 1970s under President Richard Nixon.

This trend continued until 1989, when the Tiananmen Square Massacre (known as the “June Fourth Incident” in China) prompted U.S. sanctions against China and renewed military and political support for Taiwan.

With the exception of minor hiccups along the way, the U.S. and China eventually worked again towards normalizing their relationship, which culminated politically with the presidential proclamation of the granting of PNTR status to China – thereby closing the book on 50 years of Cold War antagonism.

Although not on as grand a scale as the political impact, the legal implications of this normalization are significant nonetheless.

As is generally well-known, U.S. businesses desire strong economic ties with China – both for access to cheap, low-skilled labor and to the sizeable market of consumers in which to sell products.

However, before China was granted PNTR status, exports from China were subject to potentially large increases in U.S. import tariffs, since the Jackson-Vanik provisions required annual renewals of China’s temporary normal trade relation status.  Such waivers typically triggered contentious political debates over China’s record on human rights and abuses of weapons proliferation.

U.S. businesses were wary of investing too much into trade with China, lest a political shift make lucrative dealings with the foreign nation suddenly impossible.

The extension of PNTR to China removed this uncertainty, and trade with China exploded as a result.

This brings us to our final set of implications – those economic in nature.

Because of this new trade status with China, a huge portion of consumer products sold in the United States are manufactured in China.  Furthermore, the granting of PNTR to China was, according to some economists, largely responsible for the loss of 1.5 million manufacturing jobs within the first year after congressional efforts toward granting this status to China began.

The U.S.’s manufacturing job market hasn’t recovered since, and has instead seen a steady decline.

Thus, despite seeming relatively monotonous, the official granting of PNTR to China has had massive implications that continue to be felt to this day.