H.R. 6636 (115^th): Mongolia Third Neighbor Trade Act

In 1992, Mongolia adopted a constitution establishing a parliamentary democracy, becoming the only nation in Asia to transition from communism to democracy. Mongolia shares land borders with only the Russian Federation and the People’s Republic of China, nations which the U.S. national security strategy states “want to shape a world antithetical to U.S. values and interests.” With a large land area and a population of only 3 million, Mongolia is the world’s most sparsely populated country, and Mongolia’s sovereignty is thought be at risk from the overwhelming influence of its much larger and more populous neighbors.

Mongolia has shown its commitment to a “third neighbor” relationship with the United States by sending troops to support U.S. combat operations in Iraq and Afghanistan, and has a strong record of troop contributions to international peacekeeping missions. Mongolia’s success as a democracy, strategic location, sovereignty, territorial integrity, and ability to pursue an independent foreign policy are highly relevant to the national security of the United States.

Mongolia describes the United States as its most important “third neighbor,” but U.S.-Mongolia trade is substantially lower than many other bilateral trading relationships, and trade has declined in recent years. Total trade in 2012 measured $707 million, but in 2017 the United States exported only $82.2 million in goods to Mongolia, and imported only $9.4 million in goods from Mongolia.

The cashmere trade is particularly important to Mongolia’s economy, but while Mongolia produces over a third of the world’s raw cashmere, it produces few finished cashmere products. Most Mongolian raw cashmere is exported to China, and the United States buys nearly all of its cashmere products from China. Preferential treatment for United States imports of certain Mongolian products, including cashmere products, would benefit the United States by facilitating increased trade with Mongolia and reducing U.S. imports of Chinese cashmere products.

Preferential treatment for United States imports of such Mongolian products would benefit Mongolia by reducing Mongolia’s economic dependence on China and promoting the development of Mongolia’s garment industry. Experts have expressed concern that Mongolia is unduly economically reliant on China, with more than 80 percent of Mongolia’s exports flowing to China annually, largely from extractive industries. Industry leaders believe that China’s trade practices hinder the diversification of Mongolia’s economy and the emergence of a domestic Mongolian garment industry, because Chinese buyers only purchase raw Mongolian cashmere, not finished garments.

The development of Mongolia’s garment industry would also promote women’s employment and empowerment. Women have historically participated in Mongolia’s garment industry at high rates, and the garment industry has historically provided safe and stable employment for women in Mongolia.