June 11, 2001 WSJ:
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U.S., China Reach Trade Agreement,
Moving China Closer to WTO Entry
By MICHAEL M. PHILLIPS
Staff Reporter of THE WALL STREET JOURNAL
SHANGHAI, China -- In a marathon session that ended more than a decade of negotiations, the U.S. and China reached agreement on a variety of sensitive trade-liberalization issues, removing one of the last stubborn obstacles to China's membership in the World Trade Organization.
The breakthrough on farm, insurance, distribution and retail trade disputes came after U.S. Trade Representative Robert Zoellick suggested privately to his Chinese counterpart, Shi Guangsheng, that the administration of U.S. President George W. Bush would shift its attention to other countries if it didn't see rapid progress from China.
The deal puts the final touches on a general agreement that former President Bill Clinton's administration secured in 1999 to bring China into the global trading body, and to win more access to the huge Chinese market for U.S. companies. It also puts to rest speculation that China sought to delay entry to give the most fragile parts of its economy time to adjust to painful market reforms. The trade pact appears to be a victory for those in the Chinese government who argued that foreign competition would provide the best impetus to restructure the sprawling agriculture sector and state-dominated industries, despite the risks of social unrest sure to accompany jarring bankruptcies and job losses.
In contrast to the slow-motion progress over the past six months, China's WTO bid is now poised to accelerate. "After 14 years of negotiations involving a lot of effort by my predecessors, we're pleased to have achieved a breakthrough that allows for full and prompt consideration of China's entry into the WTO, in time to give a boost to a new round of global trade negotiations," Mr. Zoellick said in an interview.
Last week, Mexican President Vicente Fox also pledged his support for China's WTO entry following a Beijing meeting with Chinese President Jiang Zemin. Mexico had held back from striking a WTO accord with China because of fears of being flooded with cheap Chinese textile imports, but according to China's state-run Xinhua news agency, Mr. Fox vowed to adopt a more "flexible" stance toward membership.
Beijing still has to jump through some hoops with the WTO in Geneva. Yet if all goes smoothly, China could become a WTO member before the group tries to start new global trade-liberalization talks in Qatar in November.
Movement on the WTO agreement reflects a conscious attempt by the Bush administration and the Chinese leadership to isolate commercial ties from the more contentious political and military issues that cloud relations between the two countries, particularly the Chinese detention of a U.S. navy aircrew in April and U.S. arms sales to Taiwan.
The trade deal shows "overwhelmingly once again that the economic relationship is the core of our bilateral relationship," said Mark Groombridge, a research fellow at the Cato Institute, a conservative Washington think tank. "While political differences certainly remain, by resolving the economic issues it enables us to deal with those political issues more credibly."
The Chinese are especially eager to burnish their image in the U.S. and elsewhere ahead of the decision next month on whether Beijing will be allowed to host the 2008 Olympic Games.
The Bush administration and its business allies are equally interested in opening China further to American exports and investment. U.S. officials were relieved to receive public and private assurances that China would throw its weight behind the Qatar trade negotiations, a follow-up to the failed attempt to start new trade-liberalization talks in Seattle in 1999.
The China deal is a victory for Mr. Zoellick, who held his first face-to-face meeting with Mr. Shi on Tuesday, on the sidelines of last week's Asia-Pacific Economic Cooperation forum trade ministers' meeting here. The U.S. trade negotiator came to Shanghai ready to compromise on the stickiest remaining issue -- how much the Chinese would be allowed to subsidize their farmers. And he talked about recent meetings with President Bush at Camp David, to impress upon his counterpart that any agreement he reached would have White House support.
WTO rules say that developed-country governments can spend up to 5% of the value of their national agricultural production on subsidies; developing nations can spend up to 10%. While China now spends only 2% of production to subsidize its farmers, Beijing wanted the right to spend up to 10% on a sector that provides the livelihood for roughly 70% of China's population. The U.S. wanted China to spend less, because American farmers are concerned about competition from subsidized Chinese fruits and vegetables.
During that initial meeting, however, Mr. Shi rebuffed Mr. Zoellick and indicated that he didn't want to settle the agriculture issue immediately. The Chinese insisted instead on turning to other, less-intractable disputes over U.S. access to China's retail, distribution and insurance markets.
The two men ordered their staffs to start around-the-clock negotiations on the whole gamut of disagreements. In the interim, Mr. Zoellick and Mr. Shi passed signals through Singapore's trade minister, George Yeo.
But Mr. Zoellick warned the Chinese directly that should those efforts fail, he planned to turn his attention to other countries after he left China Friday morning. "I'd like China to be part of the WTO launch, but if you're not ready, I'll move on to other topics," Mr. Zoellick told Mr. Shi, according to one person present at the closed-door session.
The implied threat seemed to have an effect. The staff negotiators were able to clear away the other issues, but remained stalled on agriculture Thursday night. Messrs. Zoellick and Shi then personally hammered away at the farm-subsidy question, finally reaching a compromise at 3 a.m. Friday. Mr. Zoellick called the White House National Security Council to pass word to the president, and talked to Agriculture Secretary Ann Veneman.
U.S. officials declined to release details of the agreement until they share it with members of Congress Monday. But they said the overall number for allowable agriculture subsidies is somewhere between 5% and 10% of production, and that China agreed not to use some WTO-approved subsidies at all. Chinese officials couldn't be reached for comment.
The U.S. trade team left China a few hours after Messrs. Shi and Zoellick shook hands, but with some members still slightly uneasy about Beijing's commitment. Mr. Zoellick was at home asleep Friday night when the U.S. Embassy in Beijing called with news that Xinhua news agency had issued a statement from Mr. Shi saying the two sides had reached "a full common understanding of the remaining issues" -- a public signal the U.S. side saw as evidence that the agreement was firmly sealed.
--Peter Wonacott in Beijing contributed to this article. |
