China lumbers towards final negotiations with WTO

Date: 30/01/1997

CHINA may be closer to becoming a member of the World Trade Organisation than many observers believe.

WTO Director-General Renato Ruggiero says his organisation is approaching an arrangement with the lumbering giant. “This is the final phase of the China negotiations,” he told European Voice in an interview this week.

EU officials are somewhat more sceptical of China's willingness to play by the rules, but they acknowledge that moves towards allowing Beijing into the world trade body are gathering pace.

“There is an acceleration in the negotiations on China's accession, but there are still a lot of problems which need to be solved,” said one, speaking as a team of European Commission negotiators travelled to China this week for talks with Trade Minister Wu Yi's deputy which will end on Saturday (1 February).

EU negotiators are concentrating on persuading China to conform to WTO rules on services, telecommunications and market access for foreign goods.

In each of those sectors, Beijing has a tough road to walk before it can satisfy the Union and other trading partners.

Virtually everyone agrees on the need to bring Beijing into the WTO - both to speed up economic reform in China and to open up its markets for foreign exports. Having both China and Russia inside the organisation rather than outside would also give it more prestige.

But there is much debate over whether to allow Beijing to accede to the group before it has fulfilled WTO rules or to require it to comply with all of them before coming in.

Ruggiero is willing to let China commit itself to reform and complete the work once it is a WTO member.

“We cannot imagine that China has to fulfil all the obligations before entry. Nobody is pretending that. But China must accept the commitments in a way which convinces us that she will fulfil them,” he insists.

That, says Ruggiero, will require “some period” of transition - not the same for all sectors, but decided on a “case-by-case” basis.

Union officials agree - more or less. “Our general position in Europe is that we are in favour of China's propitious entry into the WTO. It should not be at the margins,” said a Commission official, adding: “China has the same growth rate as Korea in the 1970s and it is 20 times bigger. Its early accession into the WTO is our overriding policy.”

But the EU stresses that Beijing still has plenty to do before it earns membership.

“In negotiations we have two goals: that China respect WTO rules, and that it open its markets to foreign goods and services,” said the official.

Commission negotiators say that in each of the three main WTO agreements - on trade in goods, services and intellectual property - there remain “substantial outstanding issues”.

And although they report “the right atmosphere” in talks concerning trade in goods, they warn that the mood is not so favourable when it comes to services.

For instance, European (or any foreign) banks are forbidden to provide services to Chinese citizens or to work in the local currency. Foreign companies may not set up sales offices in China, so domestic products have a permanent advantage over imported goods.

In the area of distribution, say officials, Beijing has “given us distribution commitments of no value at all,” blaming that for much of the EU's 8-billion-ecu trade deficit with China.

The country's telecommunications sector is also “completely closed off to foreign investment”.

With EU negotiators likely to sew up a deal to open telecoms markets around the globe at WTO headquarters in Geneva on 15 February, the pressure on China is growing.

“The difference between China's attitude and the openness shown in the telecoms talks is enormous,” said one negotiator.

Ruggiero hinted that he would like to see China in the club in time for the 50th anniversary celebrations of the Bretton Woods institutions - which include the WTO's predecessor, the General Agreement on Tariffs and Trade - next year.

To that, Union negotiators reply firmly that the ball is in China's court. “They have to take the decisions in principle. If they do not, China will not accede to the WTO. If they do, we have a running chance that China could join in eight months,” said one.