THE EFFECTS OF CHANGING US MFN STATUS FOR CHINA

This paper focuses on the effects of the U.S. not renewing Most Favore d Nation (MFN) trade status for Chinese imports. An applied general eq uilibrium model is used to simulate the increase in tariffs from the c olumn 1 (MFN) to the column 2 (non-MFN) duty level. Using 1992 data, t he results show Chinese exports to the U.S. drop by approximately $11 billion, or over 50 percent. The U.S. and China both experience a decl ine in real income. While these results suggest MFN withdrawal would h ave a larger detrimental effect on the Chinese economy than on the U.S . economy, the estimates do not include Chinese retaliation.