What is the debate on weather or not China should retain favored-nation trading status all about? Is it really a decision on what is best economically for the United States, and China. Or is it: the issue of Chinese human rights violations and the fact that if the United States where to revoke the favored nation status of China it would have a profound negative impact on the U.S. economy alone.
(+)Most-favored-nation trade status started in the United States as a version of the European preferential trade system. The Carter Administrationfirst granted most-favored-nation trading status to China in 1980, following the historic efforts of President Nixon during the 1970's to restore diplomatic ties. Historically, a significant difference existed between the unconditional most-favored-nation clause in European trade law and the American version of conditional most-favored-nation. Under unconditional most-favored-nation status, one country’s extension of tariff concessions guarantees the same concessions to all nations associated with it through commercial treaties.
American conditional most-favored-nation status provided treaty signatories only the opportunity to negotiate most-favored-nation status when most-favored-nation status was extended to another trading partner. Thus meaning that the United States gives significant economic advantages to one nation in the form of most-favored-nation trading status. Under the Trade Act of 1974, most-favored-nation status could only be granted to China through a Sino-American bilateral commercial agreement and satisfaction of the Jackson-Vanik Amendment requirements. The Jackson-Vanik amendment states that the President of the United States may grant a communist country such as China most-favored-nation trade status if it was in conjunction with a trade agreement and upon proper improvement that China would permit emigration. Also China would have to satisfy that they are moving tow.