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Fri, 26 Mar 1999, 8:24pm EST
U.S., China Move Closer to Breakthrough on WTO Membership Before Zhu
Visit
U.S., China Move Closer to Breakthrough on WTO Before Zhu Visit
Washington, March 26 (Bloomberg) -- The Clinton
administration is close to backing China's entry in the World
Trade Organization after the Asia nation promised to open its
markets to everything from AT&T Corp. telecommunications
equipment to North Dakota wheat, analysts, company officials and
Clinton aides said.
The two sides are aiming for an announcement before Chinese
Premier Zhu Rongji arrives in the U.S. April 6 for a state visit,
said U.S. negotiators and executives briefed on the negotiations.
Final details have yet to be worked out, and business groups like
the U.S.-China Business Council and the Business Roundtable are
gearing up for a lobbying campaign to prevent Congress from
trying to block it.
''What we hear is very encouraging,'' said Thomas Tripp,
Washington spokesman for Seattle-based airplane maker Boeing Co.,
which expects China to buy about $120 billion in new aircraft
over the next 20 years. ''The critical issue is to ensure that
what comes back is an agreement that makes significant progress
in opening up China's market to American exports and services.''
U.S. Trade Representative Charlene Barshefsky may travel to
China this weekend or early next week to conclude talks, a
Clinton aide close to the trade talks said.
Barshefsky will press China to allow foreigners to take as
much as a 50 percent stake in telecommunications companies by a
date certain, a company official briefed on the discussions and
an aide familiar with the planning said. She also wants China to
further open its market for insurers like American International
Group, Inc. and Indiana based-Lincoln National Corp. the 10th
largest U.S. life insurer, the two officials said.
WTO Requirements
WTO entry would require China to slash its protective
tariffs, open its markets and end the long-held requirement that
doing business in China required a shotgun marriage with a local
partner.
China and the WTO have been dickering for nearly 13 years
over whether the Asian giant should be allowed into the trade
organization before its own markets are completely open.
''China, not the United States, will have to do the heavy
lifting to open its trade regime and rearrange the way it
conducts its economic affairs,'' said Robert Kapp, president of
the U.S.-China Business Council. ''This is what makes these
negotiations so difficult for the Chinese.''
''We're hopeful but it's not a sure deal,'' said Michael
Maibach, Intel Corp.'s vice president of the company's government
affairs office in Washington, who has been briefed by USTR
negotiators.
''Zhu has to be able to break the eggs to make the omelet in
his own country, where investment is declining and there is
higher unemployment,'' Maibach said. ''During tougher times, it's
tougher to make change.''
Zhu's Role
Zhu took a direct role in the talks, putting his personal
prestige on the line.
''I have felt a sea change in the expectations of companies
doing business with China in just the last couple of weeks and in
the last 24 hours several executives said quite likely a deal
will get done,'' said Dan Tarullo, formerly Clinton's top
international economist and now a scholar at the Council on
Foreign Relations.
So far, China has proposed opening its telecommunications to
foreign investment by 2005, with a ceiling of 35 percent
ownership. Foreigners now are barred from investing in Chinese
telephone companies. AT&T and BellSouth Corp. already have been
doing some limited business in China.
''From an investor's point of view, 35 percent is probably
enough,'' said Laurie Sherman, a former USTR lawyer now with
Paull, Weiss, Rifkind, Wharton & Garrison, a Washington-based law
firm. ''It gets you reasonable control. And you probably wouldn't
survive in a Chinese market alone anyway.''
'Huge Opportunities'
There are ''huge opportunities'' for Lucent Technologies
Inc. and Motorola Inc. if China agrees to start buying foreign
telephone equipment, Sherman said.
China also proposed allowing joint venture retail banks and
insurance companies in selected cities of China by 2005,
according to an administration official close to the discussions.
A push for more concessions from China came yesterday at a
White House meeting between President Bill Clinton, Treasury
Secretary Robert Rubin, key economic aides and Barshefsky, two
Clinton aides familiar with the discussions said.
The conclusion: while the Chinese had progressed farther
than expected in the past two weeks, they must offer more on
telecommunications, insurance and banking for an agreement to
pass muster on Capitol Hill, a Clinton aide familiar with the
meeting said.
''The meeting at the White House was the best news I've
heard on this,'' said Nicholas Lardy, a China scholar at the
Brookings Institute, a Washington think tank. ''It shows that
Clinton is focusing on this and Barshefsky can walk away knowing
precisely what is the administration's bottom line.''
Insurers urged Barshefsky to urge the Chinese to allow them
to sell property-casualty life insurance in more Chinese cities,
and to oppose any Chinese effort to limit foreign ownership of
insurance companies to 50 percent.
Currently, China allows 100 percent foreign-owned affiliates
including branches, Robert Vagley, president of the American
Insurance Association, said in a letter to Barshefsky today. ''We
strongly urge the Chinese be told in no uncertain terms that they
cannot retreat on this most crucial issue,'' Vagley said.
Stumbling Blocks
Textile trade is another stumbling block. The U.S. wants to
keep quotas, or import limits, on Chinese textile exports in
place for 10 years after China enters the WTO.
China wants the quotas phased out in five years, a decade
after the WTO itself began to operate. The U.S., which has
negotiated about 100 separate quotas on Chinese exports of
clothing, fabric, handbags, linens and other products imported
about $5 billion worth of these goods from China last year, down
from $6 billion in 1997.
The U.S. is also pushing for so-called tariff-rate quotas
for imports on farm produce including corn and wheat in which
China would reduce existing tariffs on imports and set quotas.
The quotas and import restrictions would be phased out. The U.S.
also wants China to lift its ban on U.S. white wheat tainted by
TCK fungus, a ban that has been in place for more than 20 years,
aides said.
The pace of negotiations on agricultural products picked up
in recent days, according to James Schroeder, deputy
undersecretary at the Agriculture Department who just returned
from negotiations in Beijing. ''They are definitely engaged, we
seem to be making progress,'' he said. ''We're not there yet.''
Political Currents
China bought $1.6 billion in U.S. grains, meats and other
products last year, making it the eighth biggest customer in the
world. U.S. farm exports could jump 69 percent to $2.7 billion a
year if China entered the WTO tomorrow, according to Agriculture
Department figures.
The discussions over agriculture have been particularly
difficult because traditionally China has tried to placate
farmers. Most Chinese uprisings, including Mao Zedong's Communist
movement, have started first in the countryside, and unrest in
the countryside makes Chinese leaders particularly nervous.
Clinton aides also are treading carefully. For China to join
the WTO, Congress must extend permanent most-favored-nation
trading status to Beijing. That's difficult in the current
atmosphere, as Congress launches investigations into Chinese
espionage in this country.
Congressional Tension
''There is growing unrest, and I believe it is on both sides
of the aisle, about China,'' said House Majority Leader Dick
Armey, a Texas Republican. That could jeopardize plans to let
China join the WTO, he said.
White House aides say they expect the business community to
urge Congress to support an agreement.
''They have to be careful,'' said Lardy. ''If the
administration's strategy is to not submit it right away,
Congress could perceive that as a sign of weakness and that could
bring the agreement under even more fire.''
That's why Clinton is focused on getting a strong agreement.
''We're looking for China to enter the WTO on commercially
viable terms that are in our national interest,'' Clinton
spokesman Joe Lockhart said today, declining to give details on
the negotiations. ''We need a good deal, and we won't take
anything short of that.''
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