ABCNEWS.com
B E I J I N G, Nov. 15 ? Chinese and U.S. negotiators
signed a breakthrough agreement today that
removes trade barriers and clears the biggest
hurdle to China?s entry into the World Trade
Organization, a milestone that will throw open a
vast market of 1.2 billion consumers to
unprecedented access by foreign firms.
U.S. Trade Representative Charlene Barshefsky and
China?s trade minister, Shi Guangsheng, signed the
agreement after six days of grueling negotiations.
Shi hailed what he called a ?win-win? agreement and
said he hoped China could join the WTO this year.
The deal sent stock prices in Hong Kong soaring to
their highest level in more than two years. It also brought
congratulations from neighbors like Japan and South
Korea as well as the Geneva-based WTO.
?I have said many times that we are not a world trade
organization until China has joined,? said WTO
Director-General Mike Moore.
Highlights of China-U.S. WTO accord
Following are highlights of today's agreement between China
and the United States paving the way for China's entry into the
World Trade Organization (WTO), as stated by U.S. officials.
AVERAGE TARIFF LEVELS: China agreed to cut its average tariff
level to 17 percent from 22.1 percent.
TELECOMMUNICATIONS: China will allow 49 percent
investment by foreign telecom providers from the date of
accession, with the figure increasing to 50 percent after two
years.
INTERNET: U.S. companies will be allowed to invest in Chinese
Internet content providers.
AUTOS: China will cut its import tariffs on automobiles to 25
percent from current levels of between 80 percent and 100
percent by 2006. U.S. firms will be allowed to provide auto
financing in China.
BANKING: Foreign banks will be able to conduct local currency
business with Chinese enterprises two years after China's WTO
entry and retail business five years after entry.
AGRICULTURE: China agreed to cut import tariffs on agricultural
products to between 14.5 percent and 15 percent and establish
tariff rate quotas for wheat, corn, rice and cotton, with a
substantial share reserved for private trade. China also agreed
to phase out state trading of soy oil.
EXPORT SUBSIDIES: China will eliminate export subsidies.
DISTRIBUTION: China will allow distribution rights for U.S.
exporters.
? Reuters
Clinton Hopeful
According to WTO rules, the U.S. Congress must grant
Beijing so-called Normal Trade Relations before
Washington can gain the benefits of China?s more open
markets within the WTO.
U.S. President Bill Clinton pledged an all-out effort to
secure congressional support.
?The China WTO agreement is good for the United
States, it?s good for China, it?s good for the world
economy,? he said during a visit to Turkey.
?Today China embraces principles of economic
openness, innovation and competition that will bolster
China?s economic reforms and advance the rule of law,?
he said.
?In opening the economy of China, the agreement will
create unprecedented opportunities for American farmers,
workers and companies to compete successfully in China?s
market, while bringing increased prosperity to the people
of China,? Clinton said.
Demands on China
A U.S. statement said China agreed to reduce its average
import duties to 17 percent from 22.1 percent. Export
subsidies will be eliminated and tariffs on farm goods will
come down.
U.S. firms will be granted access to China?s distribution
networks, and auto companies will be permitted to offer
vehicle financing. In addition, Washington has demanded
that China submit to quotas on textile shipments and
anti-dumping measures to prevent surges in low-cost
exports.
The deal will also benefit banks, insurers and telecom
companies, the statement said without elaboration.
Urgent Deadline
The agreement removes a major hurdle to China?s 13-year
bid to join the WTO, world trade?s rule-making body.
China now needs agreements with other key trading
partners, particularly the European Union, in order to
become a WTO member. Negotiators raced against the
clock to hammer out a deal to try to secure China?s WTO
entry before a November 30 deadline, when ministers of
its 134 members meet in Seattle to launch a new trade
round.
Although China still needs separate agreements with the
European Union and other key trading partners ? and
significant differences remain to be bridged in those talks
? diplomats in Beijing say others will fall into line behind
the Americans.
U.N. Secretary-General Kofi Annan, who is visiting
Beijing, said in a statement released in New York today
that he hopes the agreement will pave the way for China?s
quick entry into the WTO.
?This is a major step toward the culmination of China?s
long-standing efforts to resume its rightful role in the
multilateral trading system, and to the achievement of
universality of the system itself,? the statement said.
Benefits and Drawbacks
WTO membership will bring benefits and drawbacks to
China.
WTO membership will force fundamental changes to
China?s state-run economy by introducing fiercer
competition from abroad.
U.S. and other non-Chinese firms would be able to sell
products and services directly to Chinese consumers,
giving them greater choice at cheaper prices. But
unemployment, already running at 8 percent in cities, will
swell short-term as state factories and small family farms
fail. It will also run the risk of rising social turmoil as
indebted state factories go to the wall, throwing millions
out of work.
If the deal can be steered through Congress it will be a
major victory for Clinton, who was eager for a
breakthrough trade pact with China to help secure his
legacy.
Failure almost certainly would have been a devastating
blow to China-U.S. relations, now in a fragile recovery
following the bombing by U.S. aircraft of the Chinese
embassy in Belgrade in May.
Reuters and The Associated Press contributed to this
report.
China Stock Markets Seen Gaining
U.S. businesses in China expressed immediate delight at
news of a deal and predicted that U.S. companies would
invest more once China is bound by the WTO?s trade rules.
The deal would lead to increased trade that will benefit both
countries, they added.
?Implementation of WTO standards will reduce many of
the distribution and regulatory hardships that U.S.
businesses now face in China,? said John Sullivan, vice
chairman of the American Chamber of Commerce in China.
?That means more growth potential for American companies
and creation of more jobs back home.?
Chinese stocks are expected to rise in the short term,
analysts said. But the agreement could also bring long-term
pain to many listed companies, they said.
?It is absolutely a major positive factor to the stock market
both in the short-term and long-term,? said Zhang Lei, a
senior manager at Shenyin & Wanguo Securities. ?It will
benefit traditional sectors, including textile and trade
companies, in the near term.?
Analysts said Chinese textile firms would benefit as the
United States and other countries eased quotas. Several
textile issues surged on the Shanghai and Shenzhen stock
markets today in anticipation of a deal.
Both trade and transport companies would also gain from
the increased traffic that the deal would bring, analysts said.
But lumbering state firms in formerly heavily protected
sectors, such as chemicals and steel, would now have to
face the music of greater competition, analysts said.
?The general view is short-term gain, long-term pain as it
helps to create more competition,? said an analyst at a
foreign securities firm in Shanghai of WTO membership.
China?s bid to join the organization will also give a boost
to foreign banks and insurers in the Chinese market, but the
gains will be gradual, businessmen said today.
China has agreed to let foreign banks handle local
currency business for domestic companies after two years
but it cannot open the market wider just yet because of a
weak financial and regulatory system, they said.
?It won?t make a huge difference in the immediate period,
but it will allow an eventual opening in banking as well as
insurance,? said a Western banker.
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