Chinaís WTO Accession: Will It Happen?


Earlier this spring, the prospects of readily concluding talks on Chinaís World Trade Organization (WTO) accession seemed realistic. Chinese Premier Zhu Rongji had full State Council support as he prepared to visit the U.S. in April, and many analysts thought that agreements could be made before the ministerial meeting this November. However, Clintonís hesitation during Zhuís visit in April, followed by a series of blunders, have soured U.S.-China relations and halted WTO talks.

Prior to Zhuís April visit, Chinese and American negotiators endlessly worked on building the foundation for market-access and protocol issues for WTO agreements that were to be signed by Zhu and Clinton. Market-access agreements need to be reached in agriculture, industrial goods such as steel and textiles, and services such as telecom, insurance, and finance. Within each sector, debate surrounded fair trade practices such as ceilings on tariffs, quotas, and other non-tariff measures. Protocol concerns that need to be settled are export subsidies, lack of transparency, discriminatory regulatory processes, and non-scientific agriculture standards.

During Zhuís visit, fairly substantial market access concessions were made by China in all three sectors. However, agreements were signed for only the agriculture and auto industries. The chart on the right is a summary of tariff reductions to which Zhu agreed, according to U.S. Trade Representative Charlene Barshefskyís April 8, 1999 report. Other generous concessions lie in telecommunications and insurance. For example, China offered an initial 49 percent foreign ownership in joint telecommunication ventures.

Clinton supporters and the entire international business community urged him to sign the agreements before Zhu returned home. American domestic politics, though, once again intervened. Union employees, who fear losing their jobs to a cheaper Chinese labor market, and the conservative element in Congress alarmed by accusations of Chinese espionage, pushed Clinton to back away from Zhuís deal. The result is that America is now farther than ever from reaching a WTO agreement.

Consequences

What slipped through American hands may be hard to recover. Zhuís political plan was to return home and briskly announce the WTO deal as new government policy, powerfully overriding all domestic opposition. But, the U.S. Trade Representatives Office made public Zhuís concessions in the face of Clintonís rejection and before Zhu returned to China. The result is that Zhu now faces insurmountable domestic criticism and renewed forces of opposition to any WTO deal that immediately opens Chinaís domestic industries to foreign competition. Local Chinese officials and factory workers, who have the most to lose with the opening of Chinaís markets, have significantly increased their vocal dissent. The Chinese government has since capitalized on its domestic dissatisfaction and began back-tracking on most of the concessions to which the U.S. insists China had already agreed. Back-tracking occurs most notably in the agricultural and service industries.

When it seemed as though the U.S.-China relationship couldnít become any worse, NATO forces mistakenly bombed the Chinese embassy in Belgrade on May 7. This humiliation augmented Chinaís determination not to readily sacrifice its domestic economic considerations. China subsequently halted WTO negotiations. Barring a sufficient explanation of the bombing and due-process for accountability, China refuses to resume WTO talks. No one can predict how long this interval will continue. Though Congress is certain to renew Chinaís normal trade relations (NTR) status this July, critics say it will have little impact on Chinaís next move.

In the meantime, China actively concluded WTO talks with Japan and Australia. Known for being soft negotiators with the Chinese, the Japanese did not make any major breakthroughs with China. Thus, it is left up to the U.S. and E.U. to ensure that China enters the WTO on grounds of fair and open trade.

Despite the current tensions in U.S.-China relations, there is hope negotiations will resume. China is once again stating its desire to enter the WTO this year. But in this stalemate, both the U.S. and China are waiting for the other party to admit its mistakes and make the next move. It is imperative that each side acts quickly to meet the November 30 deadline for completing negotiations. Chinaís procrastination prolongs its sacrifice of stronger international political dialogue and a significant increase in international perception of its domestic strength. In light of the American election cycle and impending change in Chinese leadership, failure to reach an agreement now may delay it, and the benefits it brings, for several years.


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