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On May 31, the President formally recommended a one-year extension of most-favored-nation (MFN) treatment for China. [l] MFN treatment allows China's products to enter the United States at the same low tariff rates that apply to virtually all trading partners. Supporters of MFN status for China argue, among other things, that denial of MFN status could bring retaliatory actions that would hurt U.S. agricultural exports. China has threatened to retaliate if the United States denies it MFN treatment. Since China is a leading market for U.S. agricultural products, the threat of such action is a serious matter for U.S. agricultural interests.

Although recent development of China's wealth and power poses opportunities as well as challenges for U.S. policy, participants at a CRS seminar on dealing with China's rise focused on the challenges. China is seen as a very large, strategically located country undergoing rapid economic growth and social change, and ruled by authoritarian political leaders. Since the Maoist era, China has made great strides in conforming to many international norms, but a combination of rising Chinese power and nationalistic assertiveness poses serious problems for: U.S. security interests in Asia; U.S. efforts to curb trafficking in technology for weapons of mass destruction and conventional weapons; U.S. support for a smooth running market basedinternational economic systems; and U.S. backing of other international norms regarding human rights, environmental protection and other issues.

Recent political and military tensions between China and Taiwan have focused new attention on U.S. economic interests in the region. The volume of trade and investment between the United States and Taiwan and China has soared during the last 10 years. This trend has helped forge closer ties between the United States and the two economies, but has also been the source of friction. U.S. economic relations with China and Taiwan are likely to be of concern to Congress during the annual debate over U.S. renewal of China's most-favored-nation (MFN) status. This report analyzes U.S. economic ties with China and Taiwan, including trends, the major issues, and future prospects. It also examines the growing economic ties between China and Taiwan