Congressional Commission Urges End to China’s Trade Privileges
Published on October 24, 2023
New Recommendations from the U.S.-China Commission
A federal commission dedicated to analyzing U.S.-China relations has made unprecedented recommendations to Congress, advocating the termination of China’s Permanent Normal Trade Relations (PNTR) status and the duty-free entry of goods valued under 0. This extraordinary move by the U.S.-China Economic and Security Review Commission marks a significant shift in U.S. policy toward China.
Targeting Trade Relationships
Established by Congress as a bipartisan advisory body, the commission is set to present its comprehensive report to legislators, which includes 83 policy suggestions addressing a range of issues, from military threats posed by China to its exploitation of U.S. trade policies. Robin Cleveland, the commission’s chair, emphasized that decades of attempting to navigate around Chinese maneuvers within international frameworks have not yielded the desired results.
Consumer Protection in the Spotlight
Cleveland highlighted alarming testimony presented during prior hearings. Experts relayed concerns over the lack of oversight on imported goods, positing that the majority of shipments from China may include harmful or illegal products such as counterfeit items and potentially deadly substances. “U.S. agencies do not know if the majority of packages coming from China include a baby toy painted with a toxic chemical or a pinhead amount of fentanyl,” Cleveland stated. The report urges stronger legislative measures to enhance safety and legal protections for consumers.
Call for Artificial Intelligence Advancement
Among its various recommendations, the commission called for the establishment of a “Manhattan Project-like” initiative aimed at developing Artificial General Intelligence (AGI) capabilities within the U.S. This ambitious plan aims to advance American technology and ensure the U.S. remains at the forefront of AI development, a sector critical for future economic and national security considerations.
The Implications of Ending PNTR
The prospect of ending PNTR—a status granted to China since 2004, facilitating the flow of inexpensive goods into U.S. markets—gains traction in light of the Republican majority in Congress. Terminating this status would empower the President to impose higher tariffs on Chinese imports, a strategy recently endorsed by President-elect Trump, who has indicated intentions to significantly raise tariffs on imported goods from China.
Regulation of E-Commerce Shipments
The report also touches on the loophole exploited by Chinese firms to evade regulatory inspection. By sending shipments valued under 0, companies can sidestep thorough tariff assessments, a practice facilitated by the so-called “de minimus” exemption in tariff regulations. The commission advocates for stricter oversight by Customs and Border Protection to mitigate the influx of potentially harmful products, including those linked to illicit substances like fentanyl.
Legislative Proposals to Combat Economic Espionage
Further, legislators are urged to consider eliminating federal tax benefits for investments in Chinese firms included on the Commerce Department’s Entity List, which identifies organizations believed to operate counter to U.S. interests. This would involve revising tax regulations to strip these firms of favorable treatment and holding them accountable for practices that may involve intellectual property theft.
Export Controls and Investment Oversight
The commission’s report advocates bolstering export controls to restrict China’s access to critical dual-use technologies and goods, including items like advanced robotics and energy infrastructure products. Furthermore, it calls for the creation of an outbound investment office dedicated to overseeing the flow of American funds into potentially adversarial nations.
Geopolitical Tensions and Military Expansion
The year has seen escalating Chinese aggression, underscored by recent military provocations and challenges to U.S. allies in the Asia-Pacific region. The report highlights a pattern of increasing hostility, including numerous incursions into Taiwanese airspace and aggressive actions toward Philippine maritime activities. Moreover, it notes China’s first intercontinental ballistic missile test in 40 years, raising further alarms regarding its military capabilities.
Potential Economic Fallout from Tariffs
If President Trump implements proposed tariff increases—up to 60% on Chinese merchandise—economists estimate that such actions could lead to a staggering reduction of 0 billion in Chinese exports to the U.S. and inflict a one percentage point decrease on U.S. GDP. This scenario reveals the potential economic impact of escalating trade tensions, especially considering that last year alone, China exported approximately 0 billion worth of goods to the U.S., constituting about 15% of its overall exports.
