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A big bargain in beijing
Marathon negotiations for a U.S.-China WTO deal

November 22, 1999 By Leslie A. Pappas
Newsweek


THE TALKS IN BEIJING started Wednesday and were only supposed to last two days. But each time they stalled, the United States and China found a way to keep them going — just as they had for the past 13 years. For different reasons, both sides needed a deal that would pave the way for China’s entry in to the World Trade Organization. Friday evening found U.S. Trade Representative Charlene Barshefsky and National Economic Council chairman Gene Sperling back in their hotel rooms without an agreement, presumably packing to leave. But something — reportedly a nighttime phone call from Chinese Prime Minister Zhu Rongji — sent them back to the negotiating table Saturday morning. They labored all day and through the night, and continued into Sunday morning. But nobody knew when the talks would conclude.

Trade negotiators hadn’t seen this much excitement since April. That was when Zhu arrived in the United States with a package of concessions that the Clinton administration made public and then abruptly rejected, sending Zhu home empty-handed to face a barrage of criticism from hard-liners. American businesses were furious; they’ve been struggling for years to do business within China’s murky legal framework, and the terms were better than anything they’d ever seen. In some sectors, most notably telecom, they have been banned almost entirely. Zhu’s proposal not only opened up telecom and financial services (another sensitive area) but also promised foreign companies the chance to operate the service and distribution networks necessary to expand their business. But Clinton didn’t think he could sell it to the U.S. Congress. Prospects bottomed out on May 7 when NATO bombed the Chinese Embassy in Belgrade; they didn’t begin to rise again until President Clinton met with Chinese President Jiang Zemin in Auckland in September and agreed to restart negotiations.

For Clinton the deal would be a major accomplishment, both for his China policy and for his global trade policy. But for China it matters even more. With a U.S. deal, China — a major exporter — could easily strike follow-on agreements with Europe, Canada and other trading partners — and win a place at the table as the WTO refines the rules of the global trading system. Most important, a deal would give momentum to reforms that Zhu and his allies know they must pursue, but which are politically difficult. In April, Zhu offered to open telecom in five years. Information Industries Minister Wu Jichuan thinks 2020 is a more appropriate date.

Some worry that China’s economy — and society — will not be able to adapt to WTO rules. China’s backward agricultural sector, its highly protected automobile industry, and a host of state-owned enterprises would face stiff foreign competition. When Zuo Dapei, an economist at the Chinese Academy of Social Sciences, heard about the concessions that Zhu had offered in April, he was appalled. “That would destroy China’ economic future,” he argued. “If we cannot enter the WTO without so many concessions, then we shouldn’t enter the WTO.” As the recent crackdown on the Falun Gong practitioners shows, the government is terrified of social unrest. In the near term, economic reforms can only add to the millions of laid-off workers in the cities and the sense of discontent on the farms.

Apparently, though, considering WTO membership is a risk Chinese leaders feel they can’t afford not to take.

 

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