Normal Trade Relations

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In the United States, Normal Trade Relations (NTR) status refers to what the World Trade Organization and much of the rest of the world still refer to (somewhat misleadingly) as most favoured nation status. In the US the name was changed in 1998 since all but a handful of nations have this status. As of 2005, Laos, North Korea, Cuba, Russia and Afghanistan, among others, do not have NTR status with the United States.

NTR status does not necessarily imply unrestricted trade, since most-favored nation status applies only to tariffs, and many highly-restrictive non-tariff trade barriers or embargos can exist. Countries like Libya, Iran, Iraq, Syria, Sudan and others have faced embargos or difficult relations with the US without losing NTR in a legal sense.

History of NTR status in the US

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.

As of May 1997, the countries of Afghanistan, Cuba, Laos, North Korea, Vietnam, and Serbia and Montenegro were excluded from NTR/MFN; Vietnam was subsequently accorded NTR in 2001 on a year-to-year waiver basis.

Countries that wish to have Permanent NTR 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; (2) reaching a bilateral commercial agreement with the United States. Jackson-Vanik allows for the President to issue a yearly waiver to allow the granting of NTR.

NTR qualifications for Serbia and Montenegro may differ. Congressional action denied NTR status to the reconstituted state of Yugoslavia (Serbia) in reaction to the armed conflict in the region and human rights abuses committed after the breakup of the old Yugoslavia.

For many years, People's Republic of China was the most important country in this group which required an annual waiver to maintain NTR. The waiver for the PRC had been effect since 1980. Every year between 1989 and 1999, legislation has been introduced in Congress to disapprove the President's waiver. The legislation has sought to tie China's NTR renewal to meeting certain human rights conditions that go beyond freedom of emigration. All such attempted legislation had 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.

The Harmonized Tariff Schedule of the United States contains the relative rates of duty for those nations that have MFN or NTR status and those that lack it. Column 1 in the Schedule indicates the NTR or MFN rate for goods. Column 2 is the non-MFN rate. As of November 2005, only North Korean and Cuban goods were technically subject to the column 2 tariff rate.