China's trade block
The two sides were close..but not close enough
China's Prime Minister Zhu Rongji left the United States
deeply disappointed that he did not reach a trade deal
with the United States.
Mr Zhu took a considerable political
risk in coming to the US at a time
when China was under fire for its
human rights abuses, alleged stealing
of nuclear secrets, and opposition to
Nato's actions in Kosovo.
He did so in order to secure agreement with the United
States on China's terms of entry in the World Trade
Organisation (WTO) - a goal that China has sought for
13 years.
Mr Zhu Rongji left the US on Wednesday at the end of a
nine-day tour of six cities.
Almost there
In the Chinese view, the
Clinton Administration was
not prepared to take the
same risk to back the trade
deal that in the view of many
negotiators was "99%
complete."
China had offered more
concessions than ever before
in opening its markets to
foreign competition in order
to secure agreement, and in
the words of one official, "we
had a deal."
But President Clinton, fearing
that Congress would block
any agreement, failed to
finalise the details at his
summit meeting with the Chinese leader in Washington
last week.
Mr Zhu said it had been a 'terrible day' and has spent the
rest of his US trip canvassing business support for an
opening to China.
Face-saving gestures
In a face-saving gesture, President Clinton telephoned
Mr Zhu on the last day of his visit to emphasise his
support for the trade pact.
"I feel very confident that in
the near future we will see
the successful conclusion of
negotiations that are
favourable to both sides -- but
especially to the US," Mr Zhu
said after the call.
Both sides agreed to 'move
intensively' to resolve
outstanding issues by the
end of April, and the Chinese
Prime Minister said he hoped
that the deal would now be
concluded in two or three months - before the next round
of world trade talks begins in November.
The United States' top trade negotiator, Charlene
Barshefky, meanwhile told Congress that a deal was
close.
"We will re-engage with the Chinese shortly ... and work
on each of the issues that are open to bring this full
agreement to closure," she told members of the Senate
Finance Committee.
Big Chinese concessions
During the negotiations that preceded the visit the
Chinese came prepared to make major concessions in
order to open their markets to foreigners, a pre-condition
for WTO membership.
They offered to allow foreign firms access to the huge
Chinese telecoms market, including mobile phones; they
agreed to allow imports of US agricultural products that
had been blocked for years on health grounds; and they
made major concessions on allowing foreign firms to
enter the domestic banking and insurance sectors.
The concessions were not without their critics in China.
"In the short-term, our agricultural, financial and
insurance, electronics and telecommunications and
automobile sectors which are opened up to competition
will be pounded," said a Pingan Securities analysis in
the China Securities newspaper.
The Chinese government has also maintained the value
of the currency, the yuan, despite pressure to devalue
during last year's Asian financial crisis, thus protecting
the value of existing investments.
But they underestimated the strength of the political
opposition to any deal, which had been fed by the
growing size of the Chinese trade deficit with the United
States, which now exceeds that with Japan.
US political deadlock
In a series of high-level meetings with business
executives across the United States, Mr Zhu managed
to rally the corporate sector to his side in supporting the
trade deal.
He ended his trip by meeting with banking and finance
leaders in New York, after wooing other company
bosses in Denver, Chicago, and Boston, urging them to
put pressure on the government.
Over 100 business leaders went to Washington for a
briefing from the government on Monday.
"They were happy with the progress we made but were
worried that the deal would not come to fruition," one
administration source said.
But the Clinton administration, still weakened from the
President's near-impeachment, believed that the
congressional obstacles to a deal outweighed big
business support.
As in most trade matters, the President was likely to be
opposed by many in his own party, especially those who
fear that Chinese imports will hurt US manufacturing
jobs.
The President, who owed his survival to the support of
his own party, may have been more reluctant to risk
splitting it down the middle so soon after impeachment.
And the Republicans, who normally support the big
business agenda, had also indicated their reluctance to
do a deal with China.
Trent Lott, the Republican leader in the Senate, strongly
opposed any deal and said he did not believe Chinese
commitments to open markets.
The Republicans are particularly incensed by the alleged
Chinese acquisition of US nuclear secrets, and many of
them also are strong supporters of Taiwan, which China
says is a rebellious province.
The President also appeared to have been distracted by
the crisis in Kosovo.
US newspapers reported that he had not given his trade
negotiators clear instructions and priorities, and may
have been inadequately briefed for the summit.
High stakes for China
The inattention to the strategic relationship with China
this time is in stark contrast to President Clinton's visit
to China last July, when both sides reaffirmed their
support for a "constructive strategic partnership" as a
lynchpin of international affairs.
The failure to reach agreement on economic issues,
where there were strong mutual interests only highlights
the growing tensions in other areas like nuclear weapons
and the future of Taiwan.
"If the trip can provide a floor underneath the rapidly
downward spiral (of US-China relations), then it can be
judged a success," said David Shambaugh, a China
scholar at George Washington University.
The failure of the trip may also increase the difficulties of
economic reformers like Zhu Rongji, who are facing
growing opposition to their plans to modernise the
Chinese economy.
While he believes that the opening up of China to foreign
investment will stimulate the process of reform, others
fear that it could unleash social unrest and political
instability.
With economic reform now entering a crucial phase,
state-run industries would face devastating competition
from foreign imports.
Nevertheless many experts believe it is the only way
forward for China.
"The speed of the market-opening to foreign competition
puts everybody on notice. For China to become
globalised, this is the only way out," said Andy Xie,
economist at Morgan Stanley Dean Witter in Hong
Kong.
news.bbc.co.uk
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