Permanent Normal Trade Relations - History

History

In 1948 the United States joined the General Agreement on Tariffs and Trade (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 and other Communist countries. Yugoslavia 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. 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 and Serbia and Montenegro 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 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 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, 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 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.